Electricity Acts - Softcover

Leonard S. Hyman

Softcover

ISBN 10: 0910325383 ISBN 13: 9780910325387

Publisher: Public Utilities Reports, 2017

Synopsis

In the 1990s, the British government turned its whole electricity system upside down and inside out, privatizing and deregulating the utilities. The British model spread worldwide even to America. How did the British industry get into a state that required a revolution, and what did this revolution really accomplish?

The electricity revolution in Britain created millions of winners and losers consumers, coal miners, nuclear operators, investors, executives and politicians and the same process is ongoing in the United States. To be on the winning side, read Electricity Acts to learn how to survive and even thrive.

Who benefits from reading this book?

• Utility executives who have to navigate a new regulatory and financial framework
• Regulators and policy makers seeking to avoid the mistakes made in the United Kingdom
• Consumer advocates who want the average electricity user to come out ahead
• Policy makers seeking ways to assure reliability when the market does not
• Investment bankers looking for deals
• Private equity and infrastructure investors on the prowl for acquisitions
• Lenders assessing credit risk in an evolving industry
• Investors who want to avoid risks and maximize returns
• Nuclear and renewable promoters looking for support in a new market

About this title

From the Author:

I first thought about writing this book after working in a Merrill Lynch investment banking team whose presumptuous goal was to steal the British electricity privatization assignment from Goldman Sachs. We did not succeed, but in the process of trying, I met all the principal players in the industry:

•  the think tank experts who furnished ideas to the government
• the regulator
• members of Parliament
• government officials, union members 

 I even offered advice at Number 10 Downing Street, advice unaccepted. As one ever condescending civil servant put it,we Americans were there to "flog" (sell) the stocks, not offer advice.
How did the electricity industry in the United Kingdom reach a point at which it required suchmajor surgery, and why did the Tories think they had the formula to rejuvenate it? As both an early proponent of electricity deregulation and part of Merrill Lynch's British Telecom team, I thought that I had the answer to the latter question, but not the former. I began to dig into the industry's background and concluded that what happened followed from what previously happened, which sounds like the joke whose punch line is, "It's elephants all the way down." Those questions mattered because the UK's electricity restructuring set the standard, influenced California's disastrous deregulation, and prompted imitation in the rest of the world.Yet, why did 25 years of restructuring effort, hoopla and imitation produce such feeble gains forconsumers, the supposed potential beneficiaries of all the sound and fury?
So, I decided to tackle the questions from start-up to present, doing it to create a template for examining the electric industry overall, emphasizing how the industry organized, evolved and ran as a business, how and why the UK government meddled so often, and who gained from those interventions and where, in the end, that left consumers. But, did the government really meddle or is that just a conceit cooked up by free market types? Well, more than 20 major Electricity Acts, between 1882 and 1989-- one every five years-- probably qualifies as meddling. In the United States, during the same period, the Federal government enacted five or six major statutes that affected electric industry structure. People in Washington did not concern themselves about dealings between crooked politicians and public utilities in Illinois or who would build the electrified subway in New York. They let the states experiment and choose appropriate solutions. To a significant degree, they still do. Maybe that wonderful confidence ofthe central government in London that it had the answer characterized the UK's electricity market more than anything else, making this more the story of parochial politicians and plodding bureaucrats than visionary business leaders and technological wizards. Studying the UK's electricity industry has definite advantages. It depended largely on domesticfuels for most of its existence, which removed international complications from the story. Thecentral government made all the policy decisions, usually with a clear ideological bias.Consumers had the money to buy the product, local manufacturers could produce the requiredequipment and the enormous capital market in London could furnish all the money needed forinvestment. Thus, outside factors (other than government actions) probably had relatively littleimpact on the industry's development.
Moreover, as outsiders looking in, we can more clearly analyze and observe developments, having no vested interest in outcomes, no reputation to protect, no spurned arguments to rehash.We can also compare the UK and American experiences. After all, both countries are major industrial nations, burn the same fuels, have big capital markets, high levels of income, access to the same technologies and investors, and even employed some of the same entrepreneurs.How did they differ and did that difference affect the outcome? Looking forward, the Britishgovernment and its electric industry have fearlessly pioneered new industry structures andcontinue to do so, the latest being a monumental attempt to deal with energy security and globalwarming, and the sticker shock that comes with the chosen solutions. Most of the world facesthe same energy problems. Can we learn from the British or do we take the attitude that if it isnot invented here it is not worth thinking about?
Full disclosure: I was probably the first Wall Streeter (in a 1983 book) to lay out the outlinesof a competitive electricity market and I was a member of one of the first state panels that contemplated deregulation (Pennsylvania). I fervently believed that sharp competitive managers, as opposed to DOUGs (dumb old utility guys) would shape up the electricity sector.  However, I also held the quaint notion that competitive markets should benefit consumers.  Isn't that what competition is all about?

• introducing new products
•  reducing costs to stay competitive
• lowering prices in order to keep the customer? 

During electricity restructuring (nolonger called "deregulation") policy makers overlooked key aspects of electricity markets andindustry organization when they did the deed, and benefits to consumers have fallen short ofexpectations. Consumers may have ended up paying more for less.
The book follows chronological order, dividing the story into four periods, with a summary afor each comparing developments in the United Kingdom to those in the United States. Acomprehensive analysis ends the book. Look at it as a biography of an industry, the interactions of technologists, politicians, investors and customers, but not a history dominated by the big man or the big woman, the Napoleon or Elizabeth of electricity. The electric industry produced only a handful of commanding figures. The long succession of energy secretaries rarely stayed in office long enough to see their projects through to fruition. Prime ministers Attlee and Thatcher made big decisions about ownership, but the product did not change. As for the big issues in the book -- the war on coal, electricity versus pristine environment, the nuclear solution, building too much or too little, market or regulation, individually generated orcentralized power, too little or too much regulation, political interference and laws that benefitinsiders, protecting consumers or picking their pockets, and choosing the right technology ---they seem startlingly contemporary. Today's problem solvers often come up with yesterday'ssolutions. Do they solve the problems better?
To ensure clarity, I explain technical and financial terms either in text, footnotes or appendices.Readers with only a glancing knowledge of the topic might want to first read the appendix"Technics and Metrics". I present tables of data and graphs to back up my conclusions butreaders allergic to numbers can simply follow the text. I have documented all sources andexplained adjustments to data. Numbers have to play a role in any discussion of business andmarkets. They show what happened and say more than the slick, spin-filled presentations socommon in the UK nowadays.

About the Author:

Leonard S. Hyman, the author of America s Electric Utilities: Past, Present and Future, headed utility research at one of America s largest brokerage houses and was an early advocate of utility deregulation. He was part of a banking team that worked with industry and government during and after the UK's electricity privatization and that led him to investigate how the electricity market developed in the United Kingdom, why the British did what they did and what followed from all the effort. This book tells the story.

About this edition

• Publisher: Public Utilities Reports
• Publication date: 2017
• ISBN 10: 0910325383
• ISBN 13: 9780910325387
• Binding: Paperback
• Number of pages: 502
• Editor: Public Utilities Reports
• Illustrator: Front Cover: London Image, Can Stock Photo/darrin, British Flag Image, Can Stock Photo/stillfx