Post on 18-Dec-2015
Bringing about beneficial change...
POLICY DIALOGUE ON CORPORATE GOVERNANCE IN
CHINA
Presentation by Patricia Leahy, Director ,UK National Audit Office
February 2004
Privatisation, competition and regulation
Bringing about beneficial change...
Some potential privatisation benefitsEconomy• Improved budget and debt position• More competitive economy• Boost to domestic capital marketsThe business• Improved efficiency• Increased flexibility to deal with change • Greater access to capital marketsOther stakeholders• Lower prices• Improved quality of service
Bringing about beneficial change...
Achieving maximum benefits
• Corporatisation alone achieves benefits• Privatisation can double the benefits• Competition and liberalisation necessary
to achieve maximum benefits• Regulation needed to allow fair
distribution of benefits
Bringing about beneficial change...
UK experience – competition
• BT – privatised intact, duopoly policy, now full competition
• British Gas - privatised intact, now regulated Transco and commercial businesses
• Electricity – restructured then privatised, initially limited competition, now fully competitive market
Bringing about beneficial change...
Electricity privatisation in England and WalesComparison of structure pre and post privatisation
12 Supply Boards
CEGB
Customers
PowerGen
Pre privatisation Post privatisation
12 Regional Electricity Companies
Pool run by
National Grid
NationalPower
Nuclear Electric
Customers
Bringing about beneficial change...
Electricity privatisation in England and Wales
Pros and Cons of initial privatisation structure• New competitive markets created in generation
and supply• Provision at privatisation for supply competition to
be extended gradually to all customers• Capacity payments meant considerable security of
supply• Pool prices kept artificially high
Bringing about beneficial change...
Electricity privatisation in England and Wales
Subsequent market changes
• 1996 - privatisation of nuclear generation – British Energy
• 1998-99 - domestic customers able to choose their electricity supplier
- National Power/PowerGen forced to sell off generation and allowed to buy Supply Companies
• 2001 - new market based arrangements for trading introduced
• Future - single UK market to be achieved
Bringing about beneficial change...
Electricity privatisation in England and Wales
Current structure of the market
• More generators (some 40 major ones)• More suppliers (some 20 licensed)• Vertical and horizontal integration of
many utility companies• Large transparent wholesale market
Bringing about beneficial change...
Electricity privatisation in England and Wales
Generation(Contracted) Supply Company
Transmission Distribution Company
Customer
Generation(Available)
Distribution Charge
Tariff
Contract Price
Transmission Charges 75%Transmission Charges 25%
Un-contracted generation receives no revenue
UK Electricity arrangements since 2001
Flow of Electricity
Flow of Payments
Balancing Market
Imbalance Payments
Bringing about beneficial change...
Economic regulation
• Only needed if effective competition lacking
• Crucial that independent of Government• General principles - Transparency - Consistency - Predictability - Accountability• Regulatory risk
Bringing about beneficial change...
Privatisation, competition, regulation – impact on stakeholders in the UK
• Management• Shareholders• Customers• Employees