ELECTRICITY SUPPLY INDUSTRY (REORGANISATION) (Hansard, 18 July 1969)

§ The Minister of Power (Mr. Roy Mason)
With permission, Mr. Speaker. I wish to make a statement on the reorganisation of the electricity supply industry in England and Wales.
I have been giving a great deal of attention to this matter in the light of the industry's present and future needs and of developments since the review by the Herbert Committee in 1956. For this purpose I have had extensive consultation with the leaders of the industry, including representatives of the employees, and with various interested organisations.
I have come to the conclusion that the central direction of the industry needs strengthening and that the present degree of autonomy of the C.E.G.B. and area boards is not acceptable in an industry which is vital to the economy, makes heavy calls on national resources and has to take many far-reaching decisions on technical and financial issues of great complexity.
I propose, therefore, to reconstitute the Electricity Council and rename it the Electricity Authority, with new powers to plan and control the policy of the industry as a whole. The Electricity Authority will have the duty to promote the maintenance and development of electricity supply throughout England and Wales, and to secure the efficient use of resources by the industry. To discharge this duty, it will settle, subject to my approval, the capital development programme for the industry as a whole, including the programme of each of the constituent boards, and will be empowered to give instructions to boards on strategic issues relating to the policy of the industry generally. It will be responsible for keeping under review the 1092 performance of the individual boards. It will also keep under review the structure and organisation of the industry, and will advise me if changes are needed. And also, generally, it will carry on the present responsibilities of the Electricity Council, including those for research and for labour relations.
The Authority's power to give instructions on strategic policy to boards needs to be made wide enough to enable it to carry out its statutory functions properly without, however, leading to interference in ordinary management. I propose, therefore, that it should cover classes of issues specified by me under Statutory Instrument subject to the negative Resolution procedure. The most important issue on which I envisage that the Authority should be able to give instructions from the start is on the principles to be followed in framing tariffs and special agreements.
The Central Electricity Generating Board and the area boards will remain statutory bodies appointed by me, responsible for the generation, transmission, distribution and supply of electricity, with a statutory obligation to make ends meet. They will, however, discharge these duties within the framework of a broad policy for the industry as a whole which will be settled by the Electricity Authority.
By this reorganisation, I hope to obtain the advantages of the central direction of major policy which is at present lacking, while at the same time retaining the advantages in terms of managerial responsibility and local initiative which is the feature of the present system of largely autonomous boards.
These changes will require legislation, which I hope to be able to introduce during the next Session.

§ Sir J. Eden
Any move that helps to end the split between generation and distribution is to be welcomed. While the proposed inter-relationship between the Authority and the area boards may be clear enough, will the Minister say what exactly are to be the sanctions which the Authority will exercise over the C.E.G.B.? How will it end the major weaknesses of the C.E.G.B., such as overmanning, which were identified by the P.I.B. and the Wilson Committee?
The right hon. Gentleman said that the Authority's powers should cover classes 1093 of issue to be specified by him under Statutory Instrument. Other than the structure of tariffs, what has he in mind? Will he amplify that statement? Is there not a danger that the Minister is to perpetuate the wasteful duplication of the industry's capital programme by weakening the responsibility of management?
Finally, will the right hon. Gentleman say what the future holds for the present Chairman, both of the Electricity Council and of the C.E.G.B.; and who is to head the new Authority?

§ Mr. Mason
As to the C.E.G.B., flowing from the examination of the Reports of the P.I.B. and the Wilson Committee, most of the recommendations have already been dealt with. I have had a long series of discussions with the Chairman of the C.E.G.B. and some recommendations have already been put into effect.
I thought it right and proper on this occasion to use the negative Resolution procedure, because hon. Members who are aware of the structure of the electricity industry will know that it has been changed twice before. In giving the new Authority its new powers, which will he very much stronger and, of course, will include the overseeing of the C.E.G.B. and the twelve area boards, if the powers need to be strengthened instead of my having to introduce a new Bill to Parliament, I thought that I would be able to legislate through the negative Resolution procedure. Parliament will still, therefore, have an opportunity if I want to strengthen or weaken the powers of the Authority, to question it.
I brought in Sir Norman Elliott as Chairman of the Electricity Council for an interim period. Whether or not he will be a member of the future Authority is still in question, but I will be looking for a new Chairman of the Authority, who will be seen to be the chief spokesman of the industry as a whole.

§ Mr. Palmer
May I put two points to my right hon. Friend? Whilst paying full and warm tribute to him for the wide consultations he has had, particularly with the trade unions, who are grateful to him, may I ask whether he does not think that it would be valuable to opinion generally if a White Paper could be published? Secondly, does he think that, in fact, these proposed 1094 changes go far and deep enough to reorganise the industry to meet the increasingly competitive conditions which it now has to face?

§ Mr. Mason
On the latter point, because of the negative Resolution procedure which I wish to introduce, I shall have the opportunity quickly to strengthen the powers of the Authority if, in retrospect, we feel that they are not strong enough. As to a White Paper, I would have thought that my statement and the answers to questions that will flow from it may be sufficient to inform the industry as a whole of our plans for it. I will, however, keep an open mind on the question of a White Paper.
Concerning consultations, a lot of people in the industry are aware of what is being generally proposed. I have consulted the Electricity Council, the 12 area board chairmen, the C.E.G.B. and trade union representatives. To allay any anxieties about the future, I thought it desirable to make a statement as quickly as possible.

§ Mr. Lubbock
While agreeing that there is need for a greater degree of central co-operation on such matters as capital expenditure, for the reasons given by the Minister, may I ask what consideration he gave to replacing the present structure of the C.E.G.B. and the area boards by a number of bodies on the lines of the South of Scotland Electricity Board which would handle generation, distribution and sale?
Secondly, will the Minister include in the Bill the principal matters on which he proposes to give statutory directions, so that a full debate can take place on the Floor of the House at the time of the Bill, leaving only subsidiary matters on which he has not yet made a decision to be covered by Statutory Instruments?

§ Mr. Mason
On the latter point, I would welcome suggestions from hon. Members. I have mentioned that general principles on tariffs will be one of the first matters to be dealt with by the Authority. They will also include computer policy, purchasing policy and matters of that kind, on which there will be specified issues affecting the industry as a whole, so that the new Authority will be able to lay down—and, indeed, issue—directions to the C.E.G.B and the area boards on those matters.
1095 We considered joint generation and distribution but on the generation side we are now beginning to reap the benefits of the economies of scale. The C.E.G.B. is by far the largest integrated electricity supply network in the world and because of the introduction of the 600 MW generating sets and 2,000 MW stations, I thought it best to leave it alone at this stage. Again, however, the Authority will have the right to be able to look at structure and advise me accordingly.

§ Dr. John Dunwoody
Does my right hon. Friend think that his proposals will have any effect on the cost of electricity to the consumer? Does he, for example, think that these changes will mean the end of the regional variation in electricity costs?

§ Mr. Mason
I would have thought that this was a sensible move, at least to stabilise, if not reduce, costs, because the Authority will be able to oversee the whole of the industry and use its large national resources much more effectively and efficiently. When one recognises that the industry has a turnover of £1,200 million a year and spends £600 million a year, there is urgent need for an overseeing authority to control this.

§ Mr. Ridley
In welcoming the general tenor of the Minister's statement, may I ask whether his desire to achieve central control of electricity generation and supply will be extended to Scotland, where he has small, fragmented supply and generation units in one? Does his statement mean that he will be able to make Orders about the future structure of the industry under the powers which he proposes to take in the Bill?

§ Mr. Mason
Initially, I had in mind that the negative Resolution procedure would be used to look at the powers of the Authority and whether it was necessary to increase or decrease its powers according to how plans work out. I would hope that the negative Resolution could be used so that if the Authority, 1096 in looking at the structure of the industry, wished to make some sort of change, instead of having to prepare a major Parliamentary Bill, the negative Resolution could be used and, although Parliament would be able to debate it, it would not necessarily mean going through the whole rigmarole of a major Bill.
This was not examined for Scotland where, as the hon. Member knows, electricity supply is different, being based partly on water power and with sparsely populated areas to cover. I would, however, hope that we would be able to increase the consultative procedures between England and Wales and the Scottish boards.

§ Mr. Emery
The Minister will realise that there are two major omissions. Will he, therefore, say what consideration he has given for the overall manpower situation in the industry? Does he envisage its being reduced? What are the financial implications? Does he foresee a saving or does he envisage extra cost factors within this arrangement? Will the powers which the right hon. Gentleman is taking by Statutory Instrument mean that he could give directions for a single tariff structure for electricity throughout the whole of England and Wales?

§ Mr. Mason
I cannot at this stage say whether there will be any great effect on manpower. As to financial implications, the hon. Member will know that I have not yet established the financial objectives for the industry, although I hope to do so quite soon. When the Authority is established. I shall then be getting advice from a body overseeing the whole of the industry and, therefore, in that respect, I will be better advised.
Concerning tariffs, I thought it right from the start that the Authority should be able to lay down principles on tariffs and be able, if necessary, to give guidance and instruction to the C.E.G.B. and the area boards about tariffs for high-load factor users, big industrial load users, and so on.