Industry: water, steel & energy
Parkinson, Cecil (1 of 1) An Oral History of the Electricity Supply in the UK
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Parkinson, Cecil (speaker, male)
Lean, Thomas (speaker, male)
Part 1: Remarks on background to privatisation of the Electricity Supply Industry [ESI]: Prime Minister Margaret Thatcher's selection of CP as Energy Secretary due to CP previous experience in accountancy and running civil engineering business, and CP status as 'one of us' and committed to idea of competition; Chancellor of Exchequer Nigel Lawson's instruction that establishing a competitive energy market from privatisation was more important than maximising profit from sale of the industry; Whitehall view that British Gas' privatisation as a monolith was a victory for chairman Dennis Rooke over minister Peter Walker; Margaret Thatcher fondness for CEGB chairman Walter Marshall. [03:00] Remarks on early development of privatisation: limited detailed work for privatisation when CP started at Department of Energy [DoE], but team led by John Guinness and Willy Ricketts assembled; challenge of specialist aspects of privatisation, such as CEGB concerns over risks to National Grid, necessitating use of best technical and financial advisers available in developing plans; five possible structures of privatisation, whittled down during weekend workshop with advisers, anecdote about civil servant Margaret Scott's presentation on difficulty of complex split of CEGB; civil servants building up good relationship with advisers over weekend workshop; [08:30] main aim of privatisation to provide competition, such as by allowing 12 regional electricity companies the right to compete with each other; outline of structure of nationalised ESI and how it offered limited choice to consumers and lacked competition; power of Walter Marshall's obligation to supply and CEGB monopoly position. [11:49] Remarks on Walter Marshall: anecdote about Marshall putting electricity prices up due to failure of nuclear power stations; CP realising that CEGB operated in a world quite different to his previous experience; Walter Marshall's threat that CEGB board would resign if CEGB was interfered with, CP subsequently interviewing for shadow board; Margaret Thatcher's gratitude to Marshall for keeping lights on in miners' strike; [15:35] Marshall opposition to split up to CEGB, but supportive letter to CP on privatisation; Marshall's determination that nuclear power would be included in his company post privatisation, determining 70 / 30 split of assets between National Power and Power Gen; CP realising that CEGB board did not share his enthusiasm for nuclear power, possibly triggering his resignation. [18:15] Remarks on unfairly low salaries paid to senior managers in nationalised ESI: party compensated by perks; low salary but great responsibility of CEGB chairmanship compared to Power Gen chairmanship; mentions Nigel Lawson's attitude that privatised companies would set their own salaries once in private sector. [21:00] Comments on Area Electricity Boards and privatisation: meetings with Area Board chairmen in run up to privatisation; anecdote about partial leak of privatisation plans to journalist Peter Ridell; PC flight to Leeds-Bradford airport to meet with Area Board attending a conference in Harrogate; Area Board chairmen's support for eventual eventual privatisation plan, desire for independence and fear that Area Boards may be consolidated into a single distribution company; [24:50] PC arranging meeting with Margaret Thatcher for Walter Marshall to discuss his objections to privatisation plans, Thatcher support for PC plans for privatisation at subsequent meeting at Chequers; impossibility of combining competition with a generation monopoly; importance of support of area board chairman in winning public support for plans; PC advocating giving customers rights in law to protect them from problems, with advantages of revealing problems and making Area Boards more answerable; Area Board resentment of CEGB over pricing; Nigel Lawson's previous attempt to make National Grid accessible to extra generators; [30:40] transferring National Grid and obligation to supply to Area Boards intended to encourage them to provoke competition in generation; anecdote comparing competition and monopolies in sock and electricity industry; removal of obligation of supply from Area Boards undermining benefits of privatisation and eventually leading to continued government role in ESI; unintended vertical integration by Area Boards becoming generators undermining competition in electricity market; original plans for privatisation creating very competitive market of Area Boards bidding for power contracts from many generators, with others planning to enter market; less diverse and competitive structure of ESI today than that originally planned. [35:15] Remarks on competition and scope for efficiency improvements in ESI: current state of industry with 15 generators far improved from CEGB's monopoly; wastefulness of nationalised ESI, such as in purchase of expensive British Coal; anecdote about CP later experience of CEGB's uncompetitive arrangements with British Rail over coal transport, whilst CP Secretary of State for Transport; Electricity Council Chairman Philip Jones offering tiny efficiency savings by comparison with large savings made in ESI after privatisation; importance of opening up market to overturn unprofitable private deals; over-generous concessions offered by CEGB to some industrial customers; removal of energy pricing as a tool for industrial policy; desirability of limiting role of government in industry and other fields; [41:00] anecdote about past Board of Trade President Edmund Dell's remarks on keeping government interdependence out of tourist industry; inefficiency of government control of state industries; limited effects on business of recent interventionist approach of Business Secretary Vince Cable; reduction of government influence on electricity industry in favour of market approach a better model than nationalised monopolies. [43:20] Remarks on selection of two generator model for privatised ESI: need to absorb costs of nuclear power stations within a larger company; abolishment of CEGB regional structure in reorganisation creating a single set of unaudited accounts, making it technically difficult to divide CEGB's accounts in a manner acceptable to potential investors; Margaret Thatcher’s instructions of tight time-scale for privatisation process limiting time available to split CEGB; delays in parallel process for privatising water industry; possibility of privatising Area Boards before CEGB potentially creating difficult situation if Labour won 1992 election; [47:50] mentions Nigel Lawson support for splitting CEGB into more companies; limited preparation by CP predecessors Nigel Lawson and Peter Walker for privatisation; restriction of time and complexity CEGB accounts mitigating against creating more than two generating companies; intention that giving Area Boards control of National Grid would encourage them to support further competition in generation; PC visit to Shell power station near Southampton suggesting great scope for efficiency savings; tightening up of theft of electricity around Liverpool creating savings. [51:00] Remarks on political background: overriding importance of bringing competition into industry; great profitability of privatising ESI as a monolith; PC reassurance in meeting at Chequers with Margaret Thatcher and Nigel Lawson that creating competition outweighed maximising profits from share sales; splitting up industry introducing unpredictability into system and lowering potential sale value of ESI; mentions good price obtained for electricity shares in, comparison to recent post office privatisation; cabinet interested by not closely involved with privatisation. [54:20] Remarks on meeting to decide key issues of ESI privatisation at Chequers: CP previously asking Margaret Thatcher to set aside a day at Chequers to decide key issues of 1983 General Election; CP selecting the able Willy Ricketts to give presentation and asking Mrs Thatcher to avoid asking questions until he finished; Margaret Thatcher's support for electricity privatisation. [57:30] Remarks on union dominance of nationalised industries, such as coal industry, mentions similar situation with Bob Crowe and the Tube in recent years, advantages position of Tony Blair as Prime Minister after Conservatives' limiting of trade union power. [59:55] Remarks on: Tony Blair, shadow energy secretary at time of privatisation, unrealised promises to renationalise ESI; recent discussions over renationalisation of East Coast Mainline; Treasury limiting investment in nationalised industries, anecdote about French counterpart's view of British borrowing whilst CP Secretary of State for Transport; lists many nationalised industries overseen by CP in earlier role at Department of Industry and limits on their capital expenditure; limited need for extra investment in ESI at time as problems with nuclear stations were resolved; drawbacks of AGR [Advanced Gas Cooled Reactor] programme, compared to practice elsewhere, such as France; [pause 1:03:40] story about Arnold Weinstock's attempt to secure government support for a nuclear power project in Turkey, thwarted by CP and Margaret Thatcher; unrealised hopes to sell AGR power stations to the world; existence of surplus generating capacity. [1:06:50] Remarks on privatisation of nuclear power: successful example of private Duke nuclear power company in USA; public perceptions of nuclear power as dangerous; limited risk posed by low grade nuclear waste, mentions comparison with natural radiation from Cornish granite; anecdote about discovery of correlation between cancer clusters, military sites and Roman settlements; environmental groups exploiting public fears of nuclear power; [1:10:45] CP asking what provisions had been made for nuclear power station decommissioning, doubling of allowance to £3.6 billion; speculative nature of decommissioning costs, CEGB refusing to negotiate with British Nuclear Fuels [BNFL] to ascertain accurate figure; description of PC plans to set up government loans for BNFL and index gilts to cover costs of decommissioning; nuclear stations removed from privatisation after CP had left DoE for DoT. [1:14:50] Remarks on CP leaving DoE for DoT: Margaret Thatcher sending CP into DoT accidents and incidents in world of transport; CP preferring to stay at DoE and complete privatisation; mentions successor John Wakeham; mentions later loss of obligation to supply from Area Electricity Boards; CP plans to retire before election; CP meeting with Margaret Thatcher over move to DoT. [1:16:50] Remarks reflecting on privatisation process: providing basis for better competition; short story about CP coming up with idea for Non Fossil Fuel Obligation after meeting with Texan wind farm owner in Orkney; anecdote about CP learning of limited potential of wind power from civil servant on Orkney; highly stimulating period of CP's career, floatation of 17 FTSE1000 companies from nationalised industry; much more competitive energy market in UK today; CP wishing he had stayed at DoE to complete ESI privatisation; CP much involved in theory of privatising ESI and enjoying challenge; [1:21:30] short story about how experience of privatising ESI effected CP's plans for privatising British Rail; possibility for creating more competitive market if not for pressing time scales of privatisation process; mentions recent thoughts on there only being six major electricity suppliers.