Evaluating the Effects of Privatizing Electricity

Abstract

In this text of the 1993 Blackett Memorial Lecture, a critical assessment of the effects of electricity privatization in England and Wales is Undertaken, with a particular emphasis upon understanding the new economic and strategic forces in the market. This leads to some discussion of the type of modelling approaches that can provide insight into these processes. In particular, a key role for business simulation, alongside optimization methods and economic analysis, is identified as a basis for an effective regulatory framework to manage the transition to more efficient market competition. Emphasis is placed upon recognizing the impacts of risk and competition on the decision-making of the new companies in the market, and upon analysing the ‘short-termism’, the ‘dash-for-gas’, the demise of the coal industry, consumer prices and the nuclear issues in these terms.

Keywords:

• privatization
• electricity
• regulation
• strategic simulation
• cost of capital
• market risk