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On 1 January this year, gas prices were increased by 4.3 per cent, and on 1 April 1984 electricity prices by 2 per cent. In the following extracts from the report of the Select Committee on Energy, Electricity and Gas Prices (First Report, Session 1983–84, House of Commons Paper 276), we follow the committee's attempts to find out whether or not these pricing decisions resulted, in their words, ‘from the application of a lucid and rational set of principles, understood and agreed to by all the parties concerned.’
Shortly before these increases took effect, the Government had announced changes to the external financing limits (EFLS) of these two industries. Both industries are profitable and are able to finance their investment from internal sources. Their external financing limits are, therefore, negative; in other words, they make net contributions to the Exchequer. The price increases meant that the electricity industry was to contribute £m322 more than it had in the previous year, but gas only an extra £m57.
Why the difference? And why was any increase required?