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Electricity Privatisation

Volume 164: debated on Monday 18 December 1989

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1.

To ask the Secretary of State for Energy what estimate he has made of the likely impact of privatisation on electricity prices; and if he will make a statement.

Competition in electricity generation and supply, combined with price control where monopolies remain, will put downward pressure on prices to the benefit of the consumer.

Will my right hon. Friend do his utmost to see that the undoubted efficiencies arising from privatisation are passed on in the form of reduced costs and to ensure that any additional future costs arising from nuclear decommissioning are not passed on as extra costs?

The regulatory regime will provide for benefits to be passed on to consumers. On nuclear energy, as in the past, electricity customers will continue to pay the best estimate of the cost of the decommissioning when they purchase electricity. We have taken powers to contribute to these costs should they subsequently increase.

With regard to the impact of privatisation on electricity prices, does the Minister understand the sense of moral outrage that there will be throughout the country at today's announcement that Lord Marshall is to receive a golden handshake of £250,000? Does the Minister agree that because of his record of advice on nuclear power and the dishonest costing of nuclear electricity, Lord Marshall's decisions and advice have cost us billions of pounds? Would it not be a suitable epitaph for Lord Marshall if the Minister had the courage to cancel the last of the pressurised water reactors and scrap Sizewell B?

The Government have made clear their intentions on Sizewell B. We wish to see the completion of that project. As several hon. Members know, I have today received and accepted Lord Marshall's resignation as chairman of the Central Electricity Generating Board. Lord Marshall feels that in the light of my recent decisions on nuclear power he is unable to continue as chairman of the CEGB and as chairman-designate of National Power. In accepting Lord Marshall's resignation, I pay tribute to his long and distinguished career in pubic service and to his stewardship of the CEGB during the past seven years.

Is my right hon. Friend aware that the low cost prices given by the CEGB in the past for nuclear electricity have now been largely discredited? In the light of that, is my right hon. Friend inclined to believe the new high cost prices for nuclear electricity that have been given in different circumstances—with the CEGB being responsible for privatised nuclear electricity—or does he think that they, too, should be treated with a pinch of salt?

As my hon. Friend is aware, because he studies these things closely, the indicative prices that we received from National Power reflected the City's perception of the financing of nuclear power. That perception made the indicative prices so high that they were unacceptable the Government. The future prices of nuclear power are at present being discussed with the Nuclear Electric company. I have no doubt that satisfactory arrangements will be made.

What exactly does the Secretary of State mean by "downward pressure on prices"? He knows that the major fuel source of electricity is British Coal and that for the past three years there has been a real reduction in the cost of that coal, with a saving in the current financial year of £850 million on the contract. However, at the same time, by Government diktat during the past two years, there has been an increase in electricity prices of 15 per cent. Given that the new contract with the generator will continue to have the benefit of that cost reduction from British Coal, which will accumulate in the third year to a saving of about £450 million, why will not the Secretary of State tell the House and consumers that electricity prices will go down as a consequence of those massive savings?

I certainly join the hon. Gentleman in paying tribute to the efforts of British Coal and its work force to stabilise the price of coal in recent years and its continued determination to do so. What I mean by downward pressure on prices is that competition in generation, which is responsible for 75 per cent. of all electricity costs, will be a force for reducing prices.