Power to the people … but foreign companies reap the benefits

Electricity supply
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Opinion by Energy Voice

Don’t panic. I’m not thinking of setting up a protest group and marching on London. In fact, people that know me are fully aware that I’ll do anything to avoid going anywhere near the place.

No, this is much more to do with how we ended up with such a ridiculously expensive and complicated electricity supply system and why – to put it bluntly – it’s a rip-off and unlikely to ever provide the quality of service and value the country and the people deserve.

First, a little bit of history. My father was a group area manager with MANWEB (Merseyside and North Wales Electricity Board), which is now owned by ScottishPower, which is in turn owned by Spanish group Iberdrola.

Dad was involved in the electricity supply industry for his entire career. He first joined the then privately owned and wonderfully named North Metropolitan Electric Power Supply Company in Wood Green, London prior to WW2 during which he was commissioned into the Royal Navy as a “Greeny” as they were called then because electrical officers had a distinguishing dark green colour between the gold braid in the sleeves of their uniforms.

The problems with electricity supply during the storms over the New Year caused me to reflect on my father’s work and his attitude to the electricity industry.

When it became apparent that the power industry was going to be privatised he decided to take early retirement.

Despite being an avid Tory party voter he was convinced that Thatcher’s privatisation programme would lead to the break-up of the industry and destroy its public service culture.

He didn’t want to be part of that and got out early. Turns out he was right although he didn’t predict how far that break-up would go or the impact it would have on service and the industry’s benefit or otherwise to UK Plc.

Prior to privatisation the Central Electricity Generating Board (CEGB) alone was responsible for electricity generation in England and Wales whereas in Scotland we had the South of Scotland Electricity Board and the North of Scotland Hydro-Electric Board.

But on privatisation CEGB was broken up into four different entities namely PowerGen, National Power, Nuclear Electric and CEGB’s transmission operation became the “National Grid Company”.

Powergen eventually ended up as “E.ON” owned by the German company E.ON AG, National Power became “RWE npower” owned by the German company RWE and Nuclear Electric became “EDF Energy” owned by the French company EDF.

The National Grid Company looks after both electric and gas transmission networks throughout the country and is still a UK Plc. As the UK Government has no “Golden Share” in the company it could very easily also be bought up by foreign interests.

Next we have the seven Distribution Network Operators who own and operate the distribution network including all those pylons, poles and power cables that connect the grid to our homes and businesses.

Of the seven network operators only one is UK-owned and that is Scottish and Southern Energy which is a UK plc . . . for now.

Western Power Distribution is a subsidiary of the American-owned Pennsylvania Power and Light, Electricity North West is owned by a consortium of funds controlled by the Commonwealth Bank of Australia and IIF International Holding GP Limited which is controlled by the JP Morgan Infrastructure Investments Fund, The Northern Power Grid company is a subsidiary of the MidAmerican Energy Holdings Company which in turn is owned by Berkshire Hathaway Inc based in Omaha, Nebraska, SP Energy Networks is owned by Scottish Power which in turn is owned by the Spanish company Iberdrola, UK Power Networks is owned by the Cheung Kong Group (CKG) which is Hong Kong based and Northern Ireland Electricity is owned by the Irish majority state-owned company ESB Group.

Next in line in the food chain we have the electricity suppliers. These are the companies that you actually buy your electricity from. When I tried to count how many of these there now were I got up to around 30 before giving up. Many of these are, of course, now foreign-owned as well.

While I am quite astonished by the extent to which the entire UK electrical supply system is in foreign hands and all that means in terms of lack of control and profits being remitted overseas the real issue is, of course, that all these companies – about forty of them – need to make a profit and pay dividends to their shareholders.

So when you pay your electricity bill you are providing a profit to the generator, the grid company, the distribution company and finally, your supplier.

That chain is more than double the length it was pre-privatisation when you paid your bill to your local electricity board that bought its power from the CEGB.

There can be little doubt, I think, that this structure has increased costs to the consumer while delivering large profits to the owners of all these companies.

The other consideration is the collateral damage caused by privatisation. For example, the CEGB had a number of R&D laboratories that were similar in many ways to the existing US Government laboratories.

Among other topics their remit included work on nuclear power, which we’ve now been forced to outsource to the French.

The CEGB also developed wind energy technologies and installed its first wind turbine in 1982 at Carmarthen Bay, in South Wales.

It had an output of 200 kilowatts but a one megawatt turbine was installed at Richborough in Kent in 1989.

Privatisation killed all that off as indeed it helped kill off the UK electric appliance industry because the previous co-operation and joint development that went on between CEGB and manufacturers disappeared as the profit motive took precedence and the foreign owners moved in and brought with them their own suppliers.

My father’s pessimism over the future of the electricity industry was well founded and what I know of how it was run pre-privatisation tells me that if we want to achieve the same levels of public service and benefit to the country there is only one option.

The market-based solution hasn’t worked. We have to bite the bullet and renationalise it. It’s the only sensible and actually genuinely capitalist thing to do.