Fair enough

I write as former marketing director of the Electricity Council, a position I held until 1990, when the industry was privatised (“Do Britain’s energy firms serve the public interest?”, Comment, 27 October).

The Electricity Act required the council to produce a specified return on capital, employed by taking “one year with the next”. If we had a cold winter, electricity sales went sky high and the excess profit was clawed back by lowering prices the following year.

With the present system, the companies pocket the excess and are not obliged to put any money into building new power stations.

So, err, what was that return on capital? And are the current companies making more or less than that?

4 thoughts on “Fair enough”

  1. This provides the best argument I have ever seen for the privatisation of electricity generation – it keeps idiots like this out of management. Electricity prices rise in winter it is because of a relative scarcity of fossil fuel fuel supplies, not of generating capacity. If fuel prices go up, then of course electricity prices shuld go up. Allowing a fixed return on capital sms fair, amd allows the companies to cover any losses they might make because of changes in the fuel price. Obliging the generating companies to spend any excess profits on extra generating capacity solves an issue that wasnt problem.

  2. It would have been incredibly useful for this tired old brain had he given examples of how much and when.

    Given that the impact of the letter would have been vastly greater had he said “In 1986 we reduced prices by 3% and in 1983 by…” one wonders why he omitted solid facts.

    I, for one, cannot remember a time when energy prices went down, so perhaps old Jack’s suffering from the same tired old brain and it’s merely wishful thinking.

  3. I’m pants at marketing.
    But being the (ex) marketing director of a state monopoly sounds like a gig I could handle.
    Where do I sign up?

  4. Assuimg the behaviour of the electricity council was genuinely as described, if they were able to make ‘excess’ profits in winter does that mean they were attempting to manage demand rather than it being a fuel cost issue?

    Electricity prices must have risen higher than fuel prices alone could have caused otherwise there would be no excess profit.

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