Electric Utility Privatization What We Can Learn from the British Experience

Abstract

Privatization takes many forms . The act of privatization, how-ever , alway s involves "se lling st ate -owned assets to th e private sector,or ... allowing private en terpr ise to p erform functions pr eviouslyh andled by the st ate ."* That definition, of course, includes outsourcingof functions, or partn ering arra nge me nt s betw een th e gove rn me nt-owne d ent ity and a priv at e firm.Out sourcing is just a new word for contra cting out . Any well-m ana ged busine ss will en gag e an oth er firm to perform for it functionsthat it cannot p erform well on its own . That is ju st good business.Selling th e enti re gove rn me nt -owne d bu sin ess t o th e priv at e se ctor isth e most dramatic form of pri vatization. Gov ernm ent s wh ose busin essv entur es ar e disa st er s and govern me n ts in a d esp erat e hurr y to r ais emoney do not think about out sourcing. Th ey go all th e way .Th e m ost famous pr iv atiz ation effort, that of th e Thatch er gov-ern me nt, put th e conc ept on th e fr ont pag es. It embra ced priv atizationwith zeal. It pu sh ed out th e priv atization s with th e enormous gu st oa nd ferv or of th e tru e believer. Th e gove rn me nt r ak ed in billions ofp ounds . Millions of new inv estors bought sh ar es in dozen s of compa-nies. Th ose investors clean ed up, in most cas es .Is eve rybody happy ? Unfortunately, they are not. Tru e, theThatcher governm ent showed th at the governm ent could sell th edull est bu sinesses . The newly energized managements d emonstratedhow to r evitaliz e s e emin gly m oribund ent erpr is e s . But theprivatizati ons left a legacy of probl ems . We can le arn from th em .