The Trade and Industry
Committee has agreed to the following Report:-
1. In 1995, we conducted
an inquiry into Aspects of the Electricity Supply Industry.[1]
Much of that report was concerned with proposals for liberalising
the electricity supply market for consumers with a peak demand
under 100 kW in 1998. We were astonished by what we learnt at
that time about the preparations for liberalisation: we found
that there was no-one to take overall responsibility for what
will be a massive change in the industry; a reliance on a system
of bill settlement which had not been thought through or costed;
and no analysis of expected costs and benefits to consumers.[2]
Given the detrimental consequences for domestic and other low-volume
users that could arise from a poor implementation of liberalisation,
we decided that it would be appropriate to review the progress
that has been made since our last report, to ascertain to what
extent our previous recommendations have been acted upon, to consider
further unresolved issues and to assess the likelihood of successful
liberalisation in 1998.
2. Nationwide liberalisation
of the under 2,500 therms gas supply market is planned to occur
broadly concurrently with liberalisation of the under 100 kW electricity
supply market. Customer trials for low-volume gas consumers commenced
last year, on 29th April 1996, in the South West. On 10th February
this year, similar consumers in Dorset and the former county of
Avon joined those in the South West in being able to buy their
gas from any licensed supplier, followed by consumers in Kent
and East and West Sussex on 7th March. As East Midlands Electricity
told us "there are many similarities between the introduction
of competition in the two industries".[3]
We have, therefore, also considered what lessons can beneficially
be learnt by the electricity supply industry from the gas trials.
3. Liberalisation of the
low-volume gas supply market required amendment to the 1986 Gas
Act. The passage of the 1995 Gas Act gave Parliament and the
public the opportunity to scrutinise and debate the principles
of, and set conditions for, gas supply liberalisation. There
has been no such opportunity for Parliament in relation to electricity
liberalisation in 1998. This makes our inquiries all the more
essential.
4. We adopted the following
terms of reference:
"to examine
developments in respect of electricity liberalisation since the
Committee's Report in July 1995, with particular reference to
the practicality of liberalisation in 1998 and the allocation
of responsibility".
5. We received 48 memoranda,
some of which we were asked to treat as confidential, and took
oral evidence on two occasions, from Professor Stephen Littlechild,
the Director General of Electricity Supply, the Electricity Association,
and the Minister for Energy, Lord Fraser of Carmyllie. We would
like to thank all those who provided oral or written evidence.
We are also grateful for the invaluable assistance of our specialist
adviser for this inquiry, Professor John Chesshire of the Science
Policy Research Unit, University of Sussex.
1 Eleventh Report from the Trade and Industry Committee,
Session 1994-95, on Aspects of the Electricity Supply Industry,
HC 481-I. Back
2 Ibid,
para 31. Back
3 Ev. p.43. Back
