Thatcher Moves to Put British Electric Monopoly on the Block

Prime Minister Margaret Thatcher on Thursday submitted legislation to sell the electricity monopoly, a sale three times larger than previous steps in her campaign to dispose of nationalized industries.

Financial analysts have said the sale of the power generating and distribution system in England and Wales, to be completed by mid-1991, may be worth anywhere from $30 billion to $50 billion. Two separate companies will be set up in Scotland, while Northern Ireland is not affected.

The largest previous sale of shares, in British Gas in 1986, earned the government $14.2 billion. The electricity sale is apt to equal the proceeds of all previous sales, including British Petroleum, Rolls-Royce, Jaguar and British Airways.

Electricity and the privatization of the English and Welsh water supply are the two main flotations set to go through Parliament in the coming year.

“The proposals in this bill are radical, but they are evolutionary,” Energy Minister Cecil Parkinson said at a news conference introducing the legislation.

“They preserve all that is best in the present system, maintaining security of supply. And they offer the prospect of real competition, the best guarantee of customers’ interests, in an industry where there has been no competition for 30 years.”

Competition would be fostered by splitting the Central Electricity Generating Board into two companies: PowerGen, which will own 30% of CEGB’s non-nuclear capacity, and National Power, which will take over the nuclear plant and remaining non-nuclear capacity.

In advance of the bill’s introduction, the opposition Labor Party had charged that privatization would lead to increases of up to 25% in electric rates.

“Vague waffle about long-term downward pressure on costs is no consolation for consumers facing immediate and harsh pressure on their living standards,” Labor’s energy spokesman, Tony Blair, said Wednesday.

“There are no new costs created by privatization. There is no new levy created by privatization,” Parkinson asserted Thursday.

He added: “The idea that public ownership and the monopoly are some sort of insurance against price increases is a sick joke.”

Blair complained that the bill introduced Thursday lacked important details. “The meat will be in the various licenses, regulations and contracts to follow,” he said.

Parkinson said he hoped that eventually as many as 20 companies would be competing to generate and sell electricity.

Power will be sold to a dozen private supply companies, created from existing regional boards, which would serve homes and industry.

The transmission facilities owned by CEGB would be transferred to a new company, the National Grid Co., jointly owned by the 12 supply companies.

Parkinson declined to say how much the government might gain from a sale. “It is far too early to say,” Parkinson said. “We haven’t gotten anywhere near putting a value on the assets.”

CEGB has assets worth $50 billion and employs 47,000 people. The regional boards have 81,500 employees.

Shares will be sold to foreigners as well as British citizens, Parkinson said. The limit on share ownership has not been decided, but he said limiting any one stockholder to 15% of shares had worked well in other privatization plans.

Since the Conservatives came to power in 1979, the government has raised $30.5 billion by selling state-owned companies.

The latest to go on sale is British Steel, whose deadline for share applications expires today.