Executive Summary

Total sales of electricity from the public distribution system reached 284,440 gigawatt hours in 1994, with a value of £17.2bn. Estimated sales for 1995 are 291,280 gigawatt hours, representing an increase of 2.4%.

The largest sales sector is the domestic sector, accounting for 36% of volume sales. Industrial sector sales, which account for 32.9%, are dominated by energy-intensive industries such as chemicals, food, drink and tobacco, mechanical engineering, and iron and steel. Sales to the service sector (incorporating commercial, transport, public administration, etc.) showed the biggest growth between 1990 and 1994, 3% a year on average. They accounted for 30% of total electricity sales in 1994.

The industrial and commercial markets are already largely competitive. Around 50,000 customers -- all of those with electricity demand over 100 kilowatts -- can now choose their supplier and negotiate advantageous contracts. The deregulation of the domestic market in 1998 will open up a market of some 24 million households worth £7.5bn.

The market for electricity generation is liberalised, enabling new independent generators to make a significant and growing contribution. They accounted for 8% of the market in 1995.

The global market for power generation is seen as an area of future expansion, particularly in the Far East, where orders for power equipment are forecast to increase steadily over the next 15 years. Independent power producers are expected to account for around 30% of worldwide orders by the year 2000.

Competition offers the potential for significant changes in the shape of future markets, with regional electricity companies selling electricity outside their own areas, generators selling electricity direct to the customers, and new suppliers from other utilities or supermarket chains entering the market. Consumers should benefit from the resulting downward pressure on prices and the wider range of services on offer to them.

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