Customers Benefit from U.K. Electricity Competition

Customers Benefit from U.K. Electricity Competition

Electricity consumers in many areas of Europe are quickly discovering the benefits of deregulation. This is especially true in the United Kingdom where power industry privatization efforts have been the first, largest and most ambitious so far. England, Wales and Scotland just went live with residential deregulation–the first countries in the world to do this on such a scale. According to Philip Daubeney, Electricity Association`s chief executive, and the opening keynote speaker at the recent DistribuTECH DA/DSM Europe and Power Delivery Europe Conference and Exhibition held in London, competition in the United Kingdom has been good for customers.

Daubeney said that customers in the United Kingdom have already seen substantial benefits from deregulation. “There have been notable productivity gains within the utilities, resulting in lower prices and better service for customers,” he said. Daubeney reported that all customers have saved a total of 㾸 million (approximately $21 million) and the number of customer complaints has fallen by 60 percent since 1990. Daubeney attributes much of the savings to the fact that in 1997 and 1998, 67 percent of the electricity supplied in the United Kingdom was provided through the competitive energy market.

Mike Hughes, Midlands Electricity`s (ME) chief executive, who also spoke at the conference`s opening session, agreed with Daubeney. He reported that ME`s customers have certainly benefited in the last eight years. Before deregulation, ME was basically a distribution company, however, it has now moved to a supplier, he said. Deregulation has massively increased the company`s customer focus. “We now know what our products are, we market those products and sell those products,” Hughes said. The company now segments its customers and markets differently to each customer segment. In addition, ME offers many more services and has expanded its office hours to include Saturdays, making it easier for customers to conduct business. “Deregulation has had dramatic effects on cost and productivity,” he said.

EU Deregulation Directive

The European Union (EU) Deregulation Directive is a major driving force in Europe`s deregulation process. According to the EU Directive, the 15 member states (European countries) must identify certain customers who are “eligible” to contract for electricity. These customers must represent at least 25 percent of the electricity market in 1999. This minimal share will increase to 30 percent in 2005. To comply with the Directive, member states must enact certain minimum standards by February 1999. However, Daubeney believes deregulation will come about even faster than the Directive dictates. He predicts that companies with locations in several different EU states will demand competition. They will not accept competitive rates at one location and not at others, he said.

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