The Regulation of the British Electricity Industry

Miscellaneous Contributions
Challenges and Changes of Policy
By Raymond Leban, Florence Maille-Bellest


The regulation of the British electricity supply industry, which was opened up to competition in the end of the 1980s, is original. Initially meant to be light-handed, in particular in order to avoid the capture of the regulator by regulated actors. It did not apply to bulk power markets where competition was at work. It confered the regulator with very large, although themselves regulated, powers.
In fact, regulation turned out to be rather “heavy-handed.” It was perceived as disappointing in terms of price evolutions. It was criticized for several reasons: regulatory power was too concentrated in the hands of the head of the office; decisions and procedures were opaque; customers were insufficiently listened to. The system was reformed after an open and democratic process, by the Utilities Act (28 July 2000).
The previously separate gas and electricity regulators were merged into one single authority, collegiate and better governed, whose main mission is to protect the interests of electricity and gas customers. This mission was broadened and now explicitely encompasses support to poor, diseased, old and rural customers, provided that demand is supplied under conditions that are economically acceptable by electricity and gas supply firms. The powers of the regulatory authority were simultaneously significantly extended: it now has the rights to examine government social and environmental policy and to enforce competition right by itself.
Thus, the reform preserved the original choice of delegating large regulatory powers to an independant administrative authority which is not accountable for its decisions before citizens. However, because public service obligations were added to its initial mission (promoting competition), the regulator now has to arbitrate among broader policy/political objectives.
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