A History of the Liberalised Electricity Industry in 25 Freebies Part 1: SWEB, 1994

I came across an artefact last week that made me pause. It was only two inches high, made from plastic and filled with liquid circa 1994, and almost certainly intended to be emptied on the train home and thrown away. Somehow it and its contents had persisted against all the odds into the era of blogs, fake news and Love Island. Here it is:

You are looking at a miniature bottle of Scottish Whisky emblazoned with the logo of SWEB: the South Western Electricity Board. Given out during corporate entertainment at the 1994 Pilkington Cup Final, it has sat undrunk ever since.

For those of you raised in the era of Premiership rugby union, the Pilkington Cup was an English club competition between 1988 and 1997. The date inscribed on the label of May 1994 was in that prelapsarian era before matches moved from terrestrial television to Sky Sports – later that same year incidentally – and certainly prior to the league turning professional in 1996.

Somehow the little bottle spoke to me. It didn’t say “drink me”: God knows what the water of life trapped in a very small plastic phial would taste like after twenty-five years; but it did speak to me about the way the electricity industry has changed over the last twenty-five years… maybe more even than rugby has changed.

In 2010 the then Director of the British Museum, Neil MacGregor, fronted a BBC Radio 4 series called “A History of the World in 100 Objects”. Each weekday for fifteen minutes an object in the collection of the British Museum was the focus of attention, forming the jumping-off point for a discussion of world history and culture. The Lewis Chessmen, the Rosetta Stone and a <sharia compliant Visa credit card were a few examples.

Never one to pass up a bandwagon, Fintan O’Toole of the Irish Times later did a similar exercise for the National Museum of Ireland in “A history of Ireland in 100 objects”. The Ardagh Chalice and the Tara brooch likewise had their day in the sun.

Okay I agree that this small plastic bottle and its ilk are hardly the Oxus Chariot or the Broighter Ship, but you can see where this is going… we now intend to give you A history of the liberalised electricity industry in 25 freebies…

Part 1. A small bottle of whisky given out by SWEB at the 1994 Pilkington Cup Final

1994, what a long time ago. Andy Robinson was a mere player for Bath in that final, not a (former) international coach. In our industry, in Great Britain, the privatisation of 1990 had created twelve Regional Electricity Companies (RECs) in England and Wales, owning both the local distribution networks and supplying all but the largest customers in their patch.

The restructuring of the electricity industry in Great Britain had been along the following lines: the Central Electricity Generating Board (CEGB), owner of the vast majority of power generation assets, was split into National Power PLC, PowerGen plc and Nuclear Electric plc. National Grid Company inherited the transmission network in England and Wales and interconnectors, and the twelve area boards were privatised as RECs with shares offered to the public in December 1990.

South Western Electricity plc, whose area covered (according to the 1990 prospectus) 14,400 square kilometres extending from Bristol to Land’s End at the tip of Cornwall and the Isles of Scilly, was one of those area boards. It is worth sharing the charmingly optimistic first sentence in its annual accounts of 1990: “This is the first Annual Report and Accounts of South Western Electricity plc as it sets out as a public company in a new world, a world of opportunity.”

That was the spirit of the times. So how did it turn out?

Well until 1994 each REC was largely shielded from supplier competition in its own area, but then the 1MW threshold for new entrants dropped to 100kW supplies. Admittedly anybody smaller was still tied to their REC, and full competition wouldn’t arrive until the end of the decade, but nevertheless switching to an out-of-area provider was “a thing” by Spring 1994, and each REC had to respond. Should they be competing out of their own area? Should they be merging?

As it happened SWEB’s lease of life as an independent was drawing to a close. Over the summer of 1995 the Southern Company, based in Georgia, made an offer to purchase SWEB, which was eventually accepted. This was one of a wave of US acquisitions – a wave that subsequently retreated only to be replaced by the next wave emanating from the large utilities of Continental Europe (more of that in a future post).

Here are some other examples of takeover activity from US entities during 1995 and 1996:

• Central and South Western acquired Seeboard;
• GPU and Cinergy acquired Midlands Electricity;
• Dominion Resources acquired East Midlands Electricity; and
• CalEnergy acquired Northern Electric.

At the same time Manweb, the old Merseyside and North Wales Electricity Board, was being pursued by Scottish Power, and Eastern Electricity was target for Hanson. By the end of 1996 only two RECs – Yorkshire Electricity and Southern Electric – were not either in new hands or facing takeover offers.

But that wasn’t the end of the story for SWEB. The following year Southern sold a 25% stake in SWEB to Pennsylvania Power and Light (based in Allentown of Billy Joel fame), and PPL took a further 26% interest in 1998. The wires business was spun out as Western Power Distribution (WPD) in 1998.

In 1999 the energy supply business was sold to London Electricity, which itself had been owned by Entergy, another US company, but was now owned by EDF. Southern Company then created its Mirant Unit, which sold the remaining 49% of SWEB – now focussed on the wires as WPD – to PPL. So PPL remains the parent company of part of the old SWEB, and EDF the parent of the other half.

Well what is the significance of this bottle? Maybe it is emblematic of that fleeting moment where the world was in flux: on the cusp of something – that “world of opportunity” – but the players weren’t sure what exactly. The model of the industry that we are more used to, with unbundling of transmission and distribution, and large vertically-integrated generation and supply, which all seems so natural and predestined, wasn’t as clear from their vantage point. Perhaps the forces of history never are clear.

Incidentally that afternoon Bath beat Leicester 21-9 with tries from Tony Swift and Mike Catt. According to The Independent it was a “filthy afternoon” which “was admitted by all to have been a disappointment”, albeit it did have a world record attendance for a club fixture.

Forward to Part 2