§ Mr. Lawson
On 8 February, I informed the House that I had received from the Electricity Council its review of the bulk supply tariff, commissioned by my predecessor in 1980. The bulk supply tariff determines the price which the area electricity boards pay to the Central Electricity Generating Board for their supplies, and accounts for around 80 per cent. of the price of electricity to the user. I asked the council to make the review available and 309W invited comments on it from consumers. I also engaged the consultants, Coopers and Lybrands to assist my Department in assessing the important issues raised. My statement today follows careful consideration of these issues in the light of the advice and comments received.
The fundamental basis of the Government's electricity pricing policy, that prices should be properly related to economic costs, remains unchanged. However, since the announcement in January 1980 of the industry's present financial target, which expires in March 1983, a number of developments have occurred. It is now clear that the level of demand for electricity is and will remain lower than was foreseen. Present and expected capacity in the industry is more than adequate to meet forecast demand over the next few years at least. The cost to the industry of meeting marginal increases in demand is thus likely to be lower than was expected. More efficient fuel use has also helped.
In these circumstances, and in the light of my consideration of the bulk supply tariff review, I have agreed with the electricity supply industry that there should be no increase in the average level of electricity prices next year. This will be accommodated within the industry's EFL of £300 million for 1983–84, which has already been announced. Details of the tariffs which will apply from next April will be announced by the industry in due course. I shall announce as soon as possible a new financial target and performance aim, agreed with the industry, to follow the present target. This will take full account of the conclusions the industry and I have reached on economic pricing.