§ Mr. Gristasked the Secretary of State for Energy what response has been made by the South Wales electricity board to the report on the board by the Monopolies and Mergers Commission which was published earlier in the current year; and if he will make a statement.
§ Mr. Peter WalkerI have received the initial response of the South Wales electricity board to the report of the Monopolies and Mergers Commission published on 29538W February. It gives the board's comments on the commission's findings and describes the actions it is taking to meet the recommendations. Copies of the board's response have been placed in the Library of the House.
I welcome the commission's findings that the board is not pursuing any course of conduct against the public interest, that the board's financial, accounting and budgeting activities are efficiently managed and that the board has taken a vigorous approach to streamlining its management structure in recent years. While the commission questioned SWALEB's record in containing its added costs over the past decade as a whole, it recognised that in recent years the board had made considerable progress in this area and that its added costs declined in 1982–83. This improvement continued in 1983–84 in the results declared after the publication of the commission's report.
The commission noted a number of areas where improvements in the board's performance might be achieved, and the board has responded positively to the suggestions. I particularly welcome the assurance that board members will play an increasingly active role in defining corporate strategy through the formulation of quantified short and medium-term objectives. This is an issue which is relevant throughout the industry and my hon. Friend the Parliamentary Under-Secretary of State will shortly be offering advice and guidance on their role to part-time area board members.
I am also pleased that in response to other recommendations the board has established an audit committee chaired by one of its part-time members and has responded constructively to the commission's proposal that sufficient investment work should be put out to tender to enable effective comparisons to be made between in-house and private contractors' work. Action on these lines should make an important contribution to maintaining and improving efficiency and competitiveness.
In conclusions 39 and 40 the commission called for separate accounts and the establishment of financial targets for appliance retailing and contracting in order to demonstrate that the board continues to compete fairly with the private sector in these activities and that there is no cross-subsidy from the main electricity account. In agreement with the Electricity Council I announced in July measures applying to all boards which fully meet the commission's concerns and should help boards to demonstrate that they are trading fairly and profitably in these activities. In respect of the commission's conclusions on SWALEB's appliance repair business, I am glad to note that the board has taken firm action aimed at eliminating losses by 1984–85 and that financial information will continue to be provided on the progress of this activity.
The board indicated in its response that it is actively considering and implementing many other detailed recommendations made by the commission. I expect to make a further statement in due course when I have received the board's final response and report on actions taken. The commission's report also raises a number of issues which have a bearing on the efficiency of the electricity supply industry as a whole. The Electricity Council will be pursuing these points with the aim of ensuring that decisions by the area boards take full account of relevant industry-wide considerations.