§ Mr. Bill WalkerTo ask the Secretary of State for Scotland what progress has been made in discussions with the Scottish electricity boards on privatisation; and if he will make a statement.
Mr. RilkindI have given careful consideration to the steps necessary to reorganise the industry to create two companies for privatisation as proposed in the White Paper "The Privatisation of the Scottish Electricity Industry". In these discussions I have borne uppermost in mind the objectives stated in the White Paper of minimising disruption within the industry and ensuring the companies are viable and satisfactory balanced in operational terms and in terms of future profitability and prospects.
I have concluded that the nuclear assets will be shared between the successor companies to the present boards in relation to their relative size, through a subsidiary jointly and exclusively owned by the parent companies.
In order to ensure that the South company receives a satisfactory proportion of flexible and quick response capacity, the pumped storage station at Cruachan will transfer from the North company to the South company, and there will be contractual arrangements whereby the South company purchases hydro output from the North, based on 200MW of capacity on a firm basis. It will be open to the companies to contract for further supplies on a fully commercial basis.
In order to ensure that each company has the full range of fossil fuels generation available to it there will be contractual arrangements to make 600MW of coal-fired capacity available to the North and to make 50 per cent. of the oil/gas-fired capacity at Peterhead available to the South.
Finally, there will be arrangements for the sharing of spinning and standing reserves which will ensure that the operating costs of the system are minimised.
The benefits of nuclear power will therefore remain available to all Scottish consumers, both companies will have access to the full range of fossil fuel sources and the benefits of hydro generation (in terms of its low marginal costs) will be retained for the customers of the successor company to the NSHEB. These arrangements will ensure that two companies are created which are fully capable of operation on an independent basis but which will have strong commercial incentives to co-operate to minimise overall costs. The companies will be fully viable on the basis of their existing customer base and I do not therefore propose any adjustment of the present boundaries. New 508W arrangements will also be devised to ensure that both companies have equitable opportunities to export power to England and Wales over the interconnector.
Negotiations are now proceeding between the boards on the detailed terms of the contracts. In addition, discussions continue on a range of other matters concerning privatisation with a view to legislation being introduced at the earliest opportunity.