The restructuring and privatisation of the electricity distribution and supply businesses in England and Wales: a social cost-benefit analysis

In December 1990, the 12 regional electricity companies — responsible for the distribution and supply of electricity in England and Wales — were privatised. For the first few years following privatisation, real prices, profits and costs in the industry rose. Following two Price Control Reviews, prices have now fallen sharply and there have been substantial reductions in costs and more recently in profits. This paper attempts to conduct a social cost-benefit analysis of the privatisation by examining actual and predicted falls in costs over the period to 2005. We conclude that the privatisation did yield significant net benefits but that these were unevenly distributed across time and groups in society. Relative to our preferred counterfactual, consumers experience slightly lower prices and the government gains £5 billion in sale proceeds and net taxes. However, consumers begin to gain only from 2000.