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UTILITY WEEK | 11TH - 17TH DECEMBER 2015 | 29 Markets & Trading cles would have been unthinkable. Equally bizarre would have been the idea that our ability to maintain our national energy security through nuclear new-build would ultimately depend upon the vagaries of the French Treasury and the expansionist ambi- tions of the Chinese government. This is a serious issue, not just for the energy sector but for most other utility industries. The conventional mantra of our political and administrative class that what matters is the regulation of vital infrastruc- ture assets, not their ownership, is both complacent and incorrect. Foreign owners involved in major strategic decisions affect- ing the UK's utility infrastructure are likely to be conflicted by internal competition for cap- ital resources, in which our national interests are secondary and could lose out. In any really serious future energy crisis, we may well see the chickens coming home to roost. But perhaps the most glaring failure of privatisation has been the industry's inability to challenge Ofgem's continuing promotion of competitive supply as the best, and oen the only, guarantor of c onsumer benefit. Much credit is due to Ofgem for its devel- opment of a robust and coherent methodol- ogy for network price controls. On the supply side, however, the relentless ideological focus on unbundling and fragmenting for- merly integrated activities and maximising consumer churn has resulted in a dysfunc- tional retail market that is alienated from its customer base, paralysed by a degree of complexity that a Byzantine emperor would have envied, and generally unfit to deliver wider policy objectives, such as keeping the lights on at affordable cost. As it happens, exposing the industry to competitive forces was a secondary aim of the privatisation agenda: the more press- ing priorities were lower prices, greater cost efficiency, higher productivity, and a wider shareholding public. The dogged pursuit of competition under Ofgem's jurisdiction has been essentially a policy contrivance sus- tained only by regulatory artifice. Consumers themselves have never been fully engaged with this vision, and there is no benefit they have gained from it that could not have been delivered at lower cost and with greater speed and clarity by direct regulation. A worried government sought to reshape Ofgem's legal remit in 2010 by requiring it to regulate the industry through the promotion of competition only where this really would be the best means of delivering regulatory objectives. Ofgem has responded to this sen- sible statutory restriction by complaining to the Competition and Markets Authority (CMA) that its ability to pursue competition- based policies is constrained by the struc- ture of its duties. This ridiculous claim has nevertheless been accepted by the CMA as a significant cause for concern – an example of regulatory group-think that opens up the prospect of further futile attempts to revive the twitching corpse of supply competition. The best thing you can do with a dead horse is bury it, not flog it. So what's the verdict, 25 years on? A great national institution, the bedrock of modern civilised life, has survived an era of almost permanent revolution. But it has not come through unscathed, and is unrecog- nisable as the industry we knew at the start of the journey. The men and women who prepared it for privatisation were a talented bunch with high ideals. It would be nice to think history will look kindly on the fruits of their efforts. But it seems more likely that future historians will look back on the era and its competition-based regulatory model as an interesting but ultimately bizarre devi- ation from the general rule that only govern- ments, not markets, can drive energy policy and that regulation must be subordinated to national co-ordination and a strong element of strategic direction. We would do well to remember this as an extraordinary era ends and the next one, equally unpredictable but probably much more dangerous, begins. Roger Barnard is a lawyer and was head of regulatory law at London Electricity, EDF Energy, and UK Power Networks from 1989 to 2010. Electricity 25 In June this year Utility Week published a special anniversary book to celebrate 25 years of privatisa- tion in the UK electricity sector. This publication reviews the history and evolution of electricity market structures, the changing roles of companies and customer service and more. It also offers insights into the memories and opinion of some of the most prominent characters who shaped the first companies to emerge fol- lowing flotation of the Recs and the first regulation of the nascent sector. These interviews include one-to-ones with John Roberts, Ian Marchant and Stephen Littlechild. To get your own copy of this book, go to: http://faversham-house.myshopify.com/products/elec- tricity25 or contact Andy Strudwick (andy.strudwick@fav-house.com) THE 12 RECS RECS' ACQUISITION DATA Electricity Flotation Price Acquisition company (11/1990) (£m) value (£bn) Eastern 648 2.4 East Midlands 523 1.3 London 523 1.3 Manweb 285 1.0 Midlands 503 1.7 Northern 295 0.8 Norweb 415 1.8 Seeboard 306 1.6 Southern 648 2.7 South Western 295 1.1 Swalec 244 0.9 Yorkshire 498 1.5 Source: Nigel Hawkins Associates 10 South Western Elec 11 Swalec 12 Yorkshire Electricity 10 7 4 6 2 1 8 5 3 9 11 12 1 Eastern Electricity 2 East Midlands Electricity 3 London Electricity 4 Manweb 5 Midlands Electricity 6 Northern Electric 7 Norweb 8 Seeboard 9 Southern Electric