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2000 Archives

Power Players in Privatization Scheme Move Forward in 2000
By John Hutchinson

During the last 20 years the United Kingdom's power industry has seen a huge turnaround. Up until 1979, the UK power generation and supply utilities displayed all the characteristics of state-owned institutions.

These nationalised utilities produced and provided expensive power to a virtually captive consumer base, using to a large extent ageing and often inefficient plant and equipment. Heavily dependent on manpower, their continued existence depended more on state subsidies than on commercial prowess in the marketplace.

(Pictured at right) Sellafield in West Cumbria, where MOX fuel assembly is shown being loaded into the Assembly Store, is the UK centre for the reprocessing of spent nuclear fuel from Britain's nuclear power stations and overseas customers.

All that was to change 20 years ago when the government of the day instigated an ambitious programme that launched the word ``privatisation'' into the vocabulary of the world's entire business community.

Throughout the 1980s, state-owned power utilities - along with a range of other nationalised businesses - in the UK lost their allegiance to the state, gaining instead a new master in the form of a demanding and highly competitive open market place.

Among the main movers behind this tidal wave of privatisations was political willpower, backed by a general public perception that efficiency would improve and customer prices would fall.

Opponents claimed it simply turned valuable state assets into privately owned, monopolistic moneymaking machines. But the process was unstoppable. By the mid-1990s it was virtually complete - at a cost to the UK of 315 billion pounds sterling of debt written off to make state-owned companies more attractive in their run-up to privatisation.

As a result of this power utilities privatisation, two major concerns - National Power and PowerGen - became responsible for 30,000 megawatts (MW) and 18,000MW of capacity, respectively. A further 8,400MW of nuclear capacity was allocated to Nuclear Electric, with another 2,100MW of hydroelectric pumped storage capacity going to the newly formed transmission operator, the National Grid Company.

Ten years later these successor companies to the former state-run industry are far from the only players in an increasingly competitive wholesale UK market. Utilities from the United States and from several European countries, as well as many other UK-based firms, are among a growing number of new entrants all now generating electricity for sale.

Power is also being leased by these newcomers by PowerGen and National Power, while the major players are strengthening their hands in other ways, as PowerGen proved recently with its acquisition of the UK's third-largest regional electricity company: East Midlands.

All these changes have brought a heavily customer-conscious market for base load generations, with nearly 50 licences already having been issued in England and Wales alone since privatisation.

Throughout Britain, no fewer than 23 new independent power producers (IPPs) are selling electricity into a newly created national pool. This continuous revolution in the country's electricity industry represents a serious challenge to the established generators and, within the next two to three years, IPPs are expected to have captured one-fifth of the total market, each of them vying to become the lowest-cost producer.

But within the confines of the UK - a market expected to grow at just one per cent each year over the next decade - IPPs' scope for further expansion is limited. This pressure is stimulating some of the larger UK IPPs into expansion overseas.

PowerGen, for example, is now one of the world's biggest IPP businesses handling projects spanning Europe, India and the Pacific Rim, working closely with governments, fuel suppliers, plant manufacturers, joint venture partners and local communities.

Today, PowerGen is developing modern power plants throughout Asia, setting tough new standards for emissions control to help ensure its commitment to the much tighter environmental restraints anticipated in Asia during the first decades of the 21st century.

UK power industry specialists are also well placed to help Japan take full advantage of the country's independent power programme, the effects of which are starting to open the electricity generation and supply market to non-Japanese companies.

Several larger UK IPPs are anxious to gain a level of involvement not only in the nation's home market - where domestic and industrial consumers alike are likely to benefit in the longer term through lower power prices - but also in major Japanese power projects undertaken for customers worldwide. One example already entering the construction phase is the new Integrated Dry Route (IDR) plant at the Tokai site near Tokyo, where BNFL Fuel Business Group of Britain has contracted to provide multi-million US dollar packages of equipment, support and technical expertise for plant installation, testing and commissioning. This agreement is the latest development in a vital UK-Japanese nuclear partnership that has flourished since the 1960s and the birth of Japan's nuclear power programme which was launched with a UK-built Magnox station at Tokai Mura. Japan's commitment to recycling has helped foster this international partnership and has played a key role in the development of BNFL's new reprocessing plant in Britain, where one-third (2,700 tonnes) of all fuel to be reprocessed in the next 10 years will be shipped from Japan.

Risley, Warrington, Cheshire, United Kingdom, WA3 6AS
Telephone: +44 1925 832000
Fax +44 1925 822711

Thermal Engineering Limited
PO Box 38, Caldervale Road, Wakefield, Lancashire, United Kingdom, WF1 5PF
Telephone: +44 1924 780339
Fax +44 1924 387320

PowerGen plc
53 New Broad Street, London, United Kingdom, EC2M 1JJ
Telephone: +44 171 826 2826
Fax +44 171 826 2890

National Power plc
Windmill Hill Business Park, Whitehill Way, Swindon, Wiltshire, United Kingdom, SN5 9NX
Telephone: +44 1793 877777
Fax +44 1793 892525.

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