§ Mr. Squireasked the Secretary of State for Energy if he has any further statement to make about objectives for any of the industries for which he is responsible.
§ Mr. Peter WalkerI have settled objectives for the Electricity Council with Mr. Philip Jones, who became chairman on 1 April 1983, in the following terms.
This letter sets out the objectives which the Government wish you to pursue as Chairman of the Electricity Council. The objectives elaborate the responsibilities and obligations placed by Statute on the Electricity Council, and in particular the duty to promote and assist the maintenance and development by Electricity Boards in England and Wales of an efficient, coordinated and economical system of electricity supply.1. Your prime objective must be by all practicable means to promote and encourage maximum efficiency throughout the industry including sustained and detailed attention to cost control by the various Boards in England and Wales through all aspects of their activities. In this context:
(a) You should encourage Boards to set challenging cost control and efficiency targets wherever practicable, and monitor them carefully;
(b) You should advise me on the setting of financial and performance targets for the electricity supply industry in England and Wales and for each Board individually; you should keep me informed on progress towards their achievement;
(c) A wide range of performance indicators should be developed and published.
2. It must also be your objective to increase the scope for competition in electricity supply. In consultation with individual Boards as necessary, you should review the prospects for the injection of private risk capital into areas of the industry's operations and make positive recommendations to me wherever possible. You should encourage the Boards to develop cooperation with private generators of electricity, within the framework laid down in the Energy Act 1983, and ensure that effective commercial and technical arrangements exist to take full economic advantage of their potential contribution to supply. I would like you to take a special interest in this area. You should also encourage the Boards to adopt and support schemes for the combined production of heat and power in accordance with the provisions in the Energy Act.
3. I shall require Boards to set out their capital investment proposals comprehensively for my approval, giving an account of the strategic framework against which they have been developed. I shall also require them to continue to pay close attention to the methodology used in capital investment appraisal.
In advising me on these proposals it should be your objective to promote the production and distribution of electricity at the lowest possible cost consistent with maintaining adequate standards e.g. of security of supply.
4. Each year, prior to submission to the Department of the Board's Capital Investment Memorandum and the Investment and Financing Review, the Electricity Council should prepare a strategic plan for the industry which will be reviewed with Government. This plan should set out up to date financial and sales forecasts, and the strategic options and issues facing the industry as well as the industry's preferred planning objectives. I shall require the Board's detailed plans for the efficient operation and cost reducing investment to be developed within this framework. The Board's plans should also take full account of the objectives agreed with Government as well as the financial and performance targets agreed and the industry's external financial limits. Bearing in mind the requirements of S.8(5) of the Electricity Act 1957, you should ensure regular, timely and effective information flows from the Boards to assist the Government and the Electricity Council to monitor performance in relation to those objectives, targets and limits.
5. You should, in consultation with the Boards, and as appropriate with Government, develop and promote a framework 437W of electricity pricing principles, within which the Boards set their prices so as to reflect the costs at the margin of meeting demands on a continuing basis, and so as to be consistent with the financial framework set by Government.
6. Subject to objective 2 above, you should seek to ensure that both the contracting and sales of appliance activities of the Area Boards are carried out effectively and economically so as to yield a proper return on the assets employed.
7. Subject of course to European Community and other international obligations, you should encourage the Boards to assist UK manufacturing industry to secure orders in export markets, in particular through the provision of support services through British Electicity International.
8. You should ensure that the industry remains sensitive to the impact of its policies and prices on consumers, and that these are properly presented to the industry's consumer representative bodies and to the public at large.
9. You should seek by all practicable means to promote close working relationships within the industry. In this connection, I draw attention to David Howell's statement of July 1980 which I attach.
10. Finally, I should make clear that the Government may wish to give further guidance to you at a later date or to impose constraints from time to time, for wider reasons, on your ability to achieve one or other of these objectives."