bringing about beneficial change... policy dialogue on corporate governance in china presentation by...

Bringing about beneficial change...

POLICY DIALOGUE ON CORPORATE GOVERNANCE IN

CHINA

Presentation by Patricia Leahy, Director ,UK National Audit Office

February 2004

Privatisation, competition and regulation


Some potential privatisation benefitsEconomy• Improved budget and debt position• More competitive economy• Boost to domestic capital marketsThe business• Improved efficiency• Increased flexibility to deal with change • Greater access to capital marketsOther stakeholders• Lower prices• Improved quality of service


Achieving maximum benefits

• Corporatisation alone achieves benefits• Privatisation can double the benefits• Competition and liberalisation necessary

to achieve maximum benefits• Regulation needed to allow fair

distribution of benefits


UK experience – competition

• BT – privatised intact, duopoly policy, now full competition

• British Gas - privatised intact, now regulated Transco and commercial businesses

• Electricity – restructured then privatised, initially limited competition, now fully competitive market


Electricity privatisation in England and WalesComparison of structure pre and post privatisation

12 Supply Boards

CEGB

Customers

PowerGen

Pre privatisation Post privatisation

12 Regional Electricity Companies

Pool run by

National Grid

NationalPower

Nuclear Electric

Customers


Electricity privatisation in England and Wales

Pros and Cons of initial privatisation structure• New competitive markets created in generation

and supply• Provision at privatisation for supply competition to

be extended gradually to all customers• Capacity payments meant considerable security of

supply• Pool prices kept artificially high



Subsequent market changes

• 1996 - privatisation of nuclear generation – British Energy

• 1998-99 - domestic customers able to choose their electricity supplier

- National Power/PowerGen forced to sell off generation and allowed to buy Supply Companies

• 2001 - new market based arrangements for trading introduced

• Future - single UK market to be achieved



Current structure of the market

• More generators (some 40 major ones)• More suppliers (some 20 licensed)• Vertical and horizontal integration of

many utility companies• Large transparent wholesale market



Generation(Contracted) Supply Company

Transmission Distribution Company

Customer

Generation(Available)

Distribution Charge

Tariff

Contract Price

Transmission Charges 75%Transmission Charges 25%

Un-contracted generation receives no revenue

UK Electricity arrangements since 2001

Flow of Electricity

Flow of Payments

Balancing Market

Imbalance Payments


Economic regulation

• Only needed if effective competition lacking

• Crucial that independent of Government• General principles - Transparency - Consistency - Predictability - Accountability• Regulatory risk


Privatisation, competition, regulation – impact on stakeholders in the UK

• Management• Shareholders• Customers• Employees

bringing about beneficial change... policy dialogue on corporate governance in china presentation by...

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