Electricity Privatisation (Hansard, 13 November 1989)

§ 1. Mr. Macdonald
To ask the Secretary of State for Energy when he plans to set a date for the privatisation of the electricity industry.

§ 18. Mr. Harry Greenway
To ask the Secretary of State for Energy when he expects the restructuring of the electricity supply industry to be implemented; and if he will make a statement.

§ The Secretary of State for Energy (Mr. John Wakeham)
The Government intend to implement the new structure of the industry at the end of March 1990 and to complete its privatisation within this Parliament; the area boards will be offered for sale in autumn 1990 and the two generating companies will be offered for sale in the first half of 1991.

§ Mr. Macdonald
I congratulate the Secretary of State on his new-found enthusiasm for the mixed economy, but I warn him that he still has some way to go. Does he agree that the decision to abandon the privatisation of nuclear power should have been taken 12 months ago by his predecessor, and that if it had been, he would not have been left with this shambles?

§ Mr. Wakeham
I agree with the hon. Gentleman this far—[Interruption.] It is not very far. If the decision had been taken before I would not have been involved in dealing with the matter when I arrived. However, it was not until the late summer and the beginning of autumn that the terms which the private sector wanted for the privatisation of nuclear power became apparent and those terms, as I reported to the House on Thursday, I was unable to recommend.

§ Mr. Benn
Is the Secretary of State aware that the statute under which he exercises his responsibilities, which was passed by the coalition Government in April 1945, requires him to be personally responsible for promoting economy and efficiency in the supply of energy? Will he now institute a public inquiry into how it was that successive chairmen of the generating board misled successive Secretaries of State on the true costs of nuclear power, at a cost to the taxpayers and electricity consumers of many billions of pounds? In those circumstances does he think it right that Lord Marshall should be compensated when he leaves the generating board?

§ Mr. Wakeham
I do not believe that an inquiry is necessary. The principal concerns about the price of nuclear power arose because of the high capital charges and the return on investment and not so much, as some 10 have suggested, because of the decommissioning costs and fuel service charges. I believe that those concerns arose, as I told the hon. Member for Western Isles (Mr. Macdonald) a few moments ago, in the summer of this year—that was why I was faced with a difficult decision.
I fully accept all my responsibilities as laid down under the statute—as no doubt the right hon. Gentleman did when in my position—and I do not believe that a public inquiry is necessary.

§ Mr. Rost
Now that nuclear power is excluded from the privatisation is there not an overwhelming case for adjusting the imbalance between National Power and PowerGen to create a more competitive climate among producers?

§ Mr. Wakeham
I recognise my hon. Friend's point, but I do not believe that that is necessary. I believe that a competitive market is developing and the proposals that I have made will ensure fair competition between the generators, whatever their size, especially the independent generators which will strongly enter the market. To change the allocation of stations at this stage would risk failing to complete privatisation in this Parliament and that would not be in the consumers' interests.

§ Mr. Dobson
Does the Secretary of State agree that his statement last Thursday, like the 13th chime of the clock, cast doubt on all that had gone before? Is it not true that no one believes any of the figures quoted by his Department in furtherance of privatisation? Does he agree that it would be better, particularly as the Government are blaming the advisers and the generating board for those figures, if the Government published a White Paper spelling out all the advice that they have received on costs and prices and projections of costs and prices for oil, coal and nuclear power stations? Would not that permit rational discussion of what is happening and some rational decisions to be taken? In short, would it not be best if the Government came clean on figures?

§ Mr. Wakeham
One problem in the past has been that some of these costs have been hidden away and we have not fully realised what they are. We believe that by our creating an electricity generating industry that is highly competitive, the market will determine the best costs, and the Government will welcome the competition that follows.

§ 2. Mr. Beaumont-Dark
To ask the Secretary of State for Energy what progress has been made in the setting up of independent generation companies after the restructuring of the electricity supply industry.

§ The Parliamentary Under-Secretary of State for Energy (Mr. Michael Spicer)
There are approaching 20 independent projects in prospect, which will provide up to 15 per cent. of present capacity in England and Wales. The first new independent generating company to be established as a result of our privatisation proposals is Lakeland Power, which has just signed a contract with the North Western electricity board for 220 MW of gas-fired generation.

§ Mr. Beaumont-Dark
Does my hon. Friend accept that without the privatisation programme we might not have heard the true cost of nuclear power and that, therefore, good has come of it? Does he also accept that the rationale behind splitting the CEGB into only two companies—of 11 which one, National Power, will produce 70 per cent. of the electricity—was nuclear power? As that rationale has now disappeared, does he agree that competition to keep down the cost of energy is most important and that there should be more than two generation companies, possibly four or five, so that people can see that privatisation is for the good of the consumer?

§ Mr. Spicer
I agree with about three quarters of that. I agree entirely with my hon. Friend that competition is the force which will bring down costs. Of course, that competition is absent in the present structure in which the monopolist sets up the costs and passes them straight to the consumer. I part company with my hon. Friend when he says that to generate competition it is necessary further to sub-divide the two major companies. There will be a multiplicity of companies and company sizes and, as I said in my initial answer, we know of 20 independent projects coming to the market representing about 15 per cent. of present capacity. That means that there will be a multiplicity of competition.

§ Mr. Allen McKay
Why is the Minister so confident about the cost of electricity when a document from his Department to the Cabinet said that, on privatisation, electricity prices would rise by 15 per cent. for domestic consumers and by 25 per cent. for industrial comsumers?

§ Mr. Spicer
I shall not comment on leaked documents, and old documents at that. There is no doubt that the competitive pressures that will exist in the industry as a result of privatisation will put downward pressure on costs. As I said, a multiplicity of new projects have been proposed with cost structures considerably below those of the present industry. New types of generation, for instance gas-fired generation, are coming forward. They have much lower cost structures and that will have an effect on prices.

Mr. Andy Stewart
In view of the statement last week by my right hon. Friend the Secretary of State for Energy on the future of the nuclear generating industry, does my hon. Friend agree that it is time to promote more strongly and quickly the environmentally friendly mini-power stations to take advantage of the cheap coal that is produced in Nottinghamshire?

§ Mr. Spicer
I agree entirely with my hon. Friend that the Nottinghamshire UDM pits have been increasing their efficiency quite remarkably. They are now among the highest productivity pits in the country. If those pits continue to improve their present rate of productivity and increased efficiency, there will be a great future not only for Nottinghamshire but for the coal industry as a whole.

§ Mr. Doran
The Secretary of State will be aware that the oil industry and the gas producers have invested heavily with a view to entering the electricity generating market with a cleaner fuel—gas. Given the present shambles of electricity privatisation, what are the prospects for that investment proceeding?

§ Mr. Spicer
That is a non-sequitur. The gas-fired generation proposals are made possible only because of privatisation and because of the competitive pressures that that will place on the industry. Far from its being a shambles, we are setting up a whole new structure that will remarkably increase the pace of competition in the industry and the downward pressure on costs. Those things will benefit the consumer.

§ Mr. Favell
My hon. Friend will be aware of the plan to place National Power's headquarters in Swindon and those of PowerGen in Birmingham. That will result in Europa house, a regional headquarters in Stockport, being phased out and 600 or 700 jobs being lost or relocated. When the new nuclear company is formed will my hon. Friend consider basing it in Stockport where there already is a dedicated, experienced and hard working staff—especially of women who cannot move elsewhere and who, if they were in the south, would be worth their weight in gold? The present plan is for a headquarters in the midlands and one in the south, and a headquarters in the north-west would be very welcome.

§ Mr. Spicer
I know that my hon. Friend has been pressing me hard on behalf of his constituents, whose jobs are at risk. As to whether, under the new arrangements, a headquarters will be placed in his constituency, I cannot give him a definitive answer, but I am sure that his points have been noted.