Socialist Worker

Will privatisation put the lights out?

Issue No. 1822

MILLIONS OF people in north west England and East Anglia this week faced worry and uncertainty over their electricity supply. An enormous crisis is sweeping Britain's power generating industry, with power stations already being shut and warnings that worse could be to come. Millions across Britain could face the kind of power cuts which hit California in the US two years ago.

Behind the crisis lies privatisation, deregulation, and the market we are told by politicians is the only way to run society. This week's crisis was sparked when TXU, a US corporation, cut off all new cash to its British and European subsidiaries. The firm owns power stations and trades in energy, through its subsidiary, TXU Energi, in Britain.

Some 5.5 million people in the north west and East Anglia depend on the firm for their electricity. Thousands of the firm's workers now face the dole, and no one knows what will happen to the people who rely on the firm for their power supply.

The blame lies with the market

THE electricity crisis stems from the privatisation and deregulation of the electricity industry pushed through under Margaret Thatcher's Tory governments in the 1980s. The privatisation was linked to a 'dash for gas'. The Tories wanted to shift away from coal power stations in their attempt to crush the miners. The surge in gas power stations paved the way for the massive pit closure programme the Tories unleashed in 1992.

The Tories also structured privatisation so that at first a few generating companies dominated supplies and could keep prices high. But other firms sniffed profit and moved in to build new power stations. New Labour helped this process. After 1997 it rejigged the way the market worked to encourage more 'competition'.

Soon there was an excess of power generating capacity in Britain, and wholesale electricity prices slumped by up to 40 percent. Ordinary people saw little benefit, as the power distribution firms simply pocketed extra profit. But the slump in prices has been catastrophic for generating firms which banked on high prices and profits.

Powergen, for example, shut down two power stations last week. More closures are expected in the future. The nuclear generator British Energy is effectively bankrupt, only kept afloat by a £650 million handout from New Labour last month.

The solution to the crisis is simple: renationalise the power stations and run the industry to meet people's needs. But that is something New Labour will not contemplate.

California chaos

A MASSIVE electricity crisis and power cuts hit California two years ago. The Californian electricity market was deregulated in 1996 - a move modelled on what Thatcher had done to British industry. In California the result was soaring electricity prices and growing demand but inadequate supply.

Speculation and dirty deals - many involving the now bust Enron firm - drove prices higher still. Generating firms deliberately restricted output to force prices even higher. Firms made vast profits. One of those which got in on the act was Scottish Power.

It gambled millions on prices in California continuing to rise. But when the market fell Scottish Power lost a fortune and pushed through job cuts and attacks on its workforce in Britain.

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Article information

Sat 19 Oct 2002, 00:00 BST
Issue No. 1822
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