Electricity Industry

HC Deb 02 November 1987 vol 121 cc633-4

1. Mr. Atkinson

asked the Secretary of State for Energy if there are any plans for further capital investment in the electricity supply industry.

The Secretary of State for Energy (Mr. Cecil Parkinson)

The electricity supply industry is entering a period of intensive growth and re-equipment and this year intends to spend some £1,300 million on capital investment. In 1988–89 capital investment in the industry will increase and will continue to rise thereafter.

Mr. Atkinson

Does my right hon. Friend agree that power workers have done and are doing a tremendous job restoring electricity supplies following the hurricane last month? However, does that not demonstrate once again the vulnerability of our overhead power lines and their detrimental effect on the environment? Will my right hon. Friend take that into account when drawing up investment aims in the privatisation programme to include transmission as well as the generation of electricity?

Mr. Parkinson

I thank my hon. Friend for his remarks about the electricity supply workers. I am sure that the whole House would wish to join me in congratulating those workers on effectively rebuilding the rural distribution system, which took nearly 20 years to develop and which was rebuilt in only two weeks.

My hon. Friend may be interested to know that this year and next we shall spend more on the transmission system than on generation. We recognise the need to modernise the system. I am sorry that I cannot promise that we will put all the cables underground. The cost is massive. It would amount to roughly 10 times the cost of overhead power lines. I cannot see any prosepect of being able to afford to make that investment in any time span that my hon. Friend could imagine.

Mr. D. N. Campbell-Savours

How would the Secretary of State respond to the remarks made by Mr. John Banham, the director general of the Confederation of British Industry, who said that privatisation would lead to a £1.2 billion hike in industrial electricity prices and lack of competitiveness in British industry? How would the right hon. Gentleman respond to those concerns?

Mr. Parkinson

I do not share those concerns. The truth is that the British electricity industry provides power to British industry at a very competitive price. British industry needs a secure supply, and that means a massive investment programme between now and the year 2000. That programme must be paid for. We are concentrating on having a modern electricity supply industry in the years ahead. That must be a great boon for British industry.

Mr. Rost

Does my right hon. Friend accept that, pending privatisation, major new orders for power stations by the Central Electricity Generating Board should be allowed to go ahead only if they can be justified on real commercial rates of return or by raising money at commercial rates? Otherwise, privatisation may be undermined and private producers who have to raise money at commercial rates of return will be jeopardised.

Mr. Parkinson

I agree that the industry has to raise its money in the market and make investments on a sound commercial basis. That is what it will do. However, we have another problem. We must ensure that the investment programme goes ahead without a hiatus. The present generation, especially of nuclear power stations, is becoming old and a substantial number of coal-fired stations need replacing. We are now entering a phase of massive investment and re-equipment.

Mr. Matthew Taylor

What rate of return is the CEGB expected to make on capital investment in nuclear generating capacity? How will that compare with the rate of return that a private, prudent investor might be expected to make on capital investment?

Mr. Parkinson

The two things should he the same. The CEGB and the private investor should get a reasonable rate of return on their investment, and they cannot expect to receive a subsidised rate of return. We are having to raise money in the market, and we have to ensure that it is well invested and that the investor, be he public or private, receives a sensible return.