Electricity Supply Industry

HC Deb 14 July 1980 vol 988 cc445-8W

Mr. Mudd

asked the Secretary of State for Energy whether he has now considered the organisation of the electricity supply industry in England and Wales; and what are his proposals.

Mr. David Howell

I have given careful consideration to how the electricity supply industry should be organised in England and Wales. I have consulted widely in the industry and have heard the views of other interests.

The industry's present structure dates from the 1957 Electricity Act and comprises 13 statutory boards—the Central Electricity Generating Board and 12 area boards—and the statutory Electricity Council which acts as a confederal body for the industry as a whole. It is the council's duty to advise me on questions affecting the industry and to promote and assist the maintenance and development of an efficient, co-ordinated and economical system of supply. In 1976 the Plowden committee recommended the unification of the industry into a single corporation. The last Administration published their proposals for such a corporation in a draft Bill which was the subject of pre-legislative hearings and a report by the Select Committee on nationalised industries towards the end of the last Parliament.

The question of the industry's organisation is not a new one. The need to strike a proper balance between healthy local independence and strategic decision-making at national level, and between generation and distribution, has been a theme for many years. The balance is not easily struck. Certainly, the creation of a large single corporation unifying the 13 boards and the council would carry significant risks of over-centralisation.

It was with this in mind that I informed the House last July that, although I did not rule out legislation to effect desirable change in the industry if it were necessary, I preferred to seek improvements if at all possible without it. I have now concluded that improved working arrangements of the kind I wished to see can be developed within the existing statutory framework.

For both technical and economic reasons the industry is divided into the generation and transmission of electricity through a high voltage grid, organised on a national basis on the one hand and its distribution by area boards on the other. I have not been persuaded that any benefits from bringing generation and distribution together in a unified corporate structure would outweigh the risk of over-centralisation.

I have been impressed by the extent of co-ordination and co-operative working that already exists in the industry. I propose to build on the progress that has been achieved and, within the terms' of the existing legislation, to develop relationships between the council and the boards, strengthening the co-ordinating and advisory role of the council and of its chairman, whom I regard as my main policy adviser within the industry, in the development of industrywide policies. I also look to closer links between the boards, particularly at local levels. The statutory responsibilities of the council and the boards will of course remain as defined by the relevant statutes. I have been assured by the council and the individual boards of their commitment to my policy. In particular, there is agreement to develop co-operative working in the following ways: —when consulting the Electricity Council on capital programmes and tariff proposals the generating and area boards will provide full information on the underlying assumptions and costs relating to those programmes and tariff proposals bearing in mind the council's duty of advising me on the maintenance and development of efficient supply by the industry. I will seek specific comments from the council before approving capital programmes; —the boards will co-operate with the council in the development of an improved financial reporting system; —the council will advise me on the further development of physical, technical and financial measures of performance by the boards; —the council will review with the generating board and the area boards the structure of the bulk supply tariff with a view to considering whether changes are desirable and will report its conclusions to me; —the boards will co-operate with the council in developing arrangements to encourage transfers of managerial staff between the two sides of the industry; —the chairman of the generating board and the chairmen of the area boards will promote closer contacts between CEGB regions and the relevant area boards.

In my consideration I have very much had in mind the industry's relations with its customers. I value the close links which exist between the area boards and the communities which they serve and wish them to continue their efforts to improve customer relations at all levels. The industry has large responsibilities and I hope that senior members of the area boards and CEGB management at regional as well as national level will continue to improve public understanding of the nature of their tasks, and their efforts to provide an economical, safe and efficient public service.

Finally I would like to thank all those in the industry both from management and the unions who have given me advice on this subject over the past months. I am conscious that widely different views are held. I believe however that all concerned will now work together to make improvements within the industry's existing statutory framework.