TABLE OF CONTENTS As well as privatizing the CEGB, the Conservative government under Prime Minister Margaret Thatcher also wanted to shake up its monopoly supply function, on the grounds that competition would be more efficient, would lower prices and encourage innovation. Clearly, there would be limited areas where competition was possible: building new wires alongside those already existing and inviting customers to switch between them was no efficiency improvement. Nor could the government achieve its aims by simply splitting the CEGB geographically: that would result in a patchwork of monopoly suppliers instead of just one. Instead, the government split the industry by function. Electricity generation and supply to customers were two areas where competition could be introduced. Operating the high-and low-voltage networks constituted monopoly activities and would remain so.
The result was a split into generation, transmission, distribution and supply that has been widely copied among other countries that have also been changing the operating model of their power industries. This model conceives the industry not as unique, but as very similar to other industries where manufacturers sell their products wholesale to retailers who supply individual customers. In this model, products are transferred from manufacturer to retailer to customer via road, rail, post, etc., using, but not owning, other freight infrastructure.
Similarly, in the so-called 'deregulated' electricity industry, a group of generating companies build and operate electricity-generating plants to manufacture electricity. They sell their electricity in bulk to supply companies with thousands or millions of small customers (or...
