Rebirth of England.

At the end of March, British media disclosed that United Power, the largest power company in the UK, was making an offer to Scottish & Southern Energy (SSE), intending to acquire the company, one of the six largest power companies in the UK, for 3 billion pounds (about 75 billion US dollars).

After this news came out, some MPs expressed their opposition. They claimed that as the largest power company in the UK, United Power Group has a complete power generation, transmission and distribution industry. If it completes the acquisition of South Scotland Power, the size gap between it and other power companies will be widened, which is not conducive to fair competition in the UK electricity market.

Of course, there are also people who disagree with this, pointing out that Scotland’s two power companies (South Scottish Power is one of them) do not fully compete in the supply of electricity in Scotland, but often form alliances on electricity prices, making it difficult for other competitors to benefit in the Scottish market.

Because although Scotland's two power companies can nominally participate in the power pool bidding, Scotland exports electricity to England and Wales through several transmission lines with extremely limited transmission capacity, and the transmission price is also inefficient, thus creating barriers to entry.

For example, in 1990, the average residential electricity price in London, England was 10% higher than that in Edinburgh, Scotland. However, after 2001, the average residential electricity price in Edinburgh was more than 10% higher than that in London.

And judging by the way the dividends were distributed, consumers did not benefit from it.

Therefore, if United Power Group completes the acquisition of South Scottish Power, it means that its market will enter the Scottish region, which will have a positive effect on local electricity competition...

As mentioned before, United Power Group, a subsidiary of United Energy Group, was formed by the merger of Enel with UK Power Networks after their acquisition of Enel.

British Electricity Distribution owns 14 of the 3 regulated power grids in the UK market, with a total length of approximately 19 kilometers of cables. The grid covers an area of ​​approximately 2.9 square kilometers, supplying electricity to more than a quarter of the UK's population. The distribution service covers London, southeast and east England, with 830 million users.

In addition, the UK distribution company also engages in the unregulated business of providing distribution services to private facilities in the form of commercial contracts, including four airports in London, the London Underground and the Channel Tunnel connecting railway.

Therefore, British Electricity Distribution Company is the largest of the six major electricity companies in the UK.

The so-called six major electricity companies in the British market are British Gas, a subsidiary of Centrica, one of the largest utility companies in the UK, E.ON UK, a subsidiary of Germany's E.on, Scottish Power, EDF Energy, a subsidiary of Electricite de France (EDF), South Scottish Electricity (SSE) and United Power Group (formerly British Electricity Distribution Company).

The "Big Six" have always had a market share of 90% to 95% in the UK.

Scottish Power and South Scottish Electric (SSE), two of the six largest energy suppliers in the UK, have their main markets in Scotland. Don’t think that SSE’s name is South Scottish Electric, so their market is in southern Scotland. In fact…

ScottishPower mainly serves central and southern Scotland, while South ScottishPower mainly serves northern Scotland.

The current market value of Scottish Electric is around 64 billion pounds. The bid from United Power Group can be said to offer a premium of nearly 15%, which is still very attractive.

After all, with the previous increase in international energy prices and the maximum price limit for electricity prices in the UK, the profitability of many power companies, including Scottish South Power, has declined. Even if they are able to negotiate with the UK Energy Market Regulator (OFGEM) on electricity price limits, their profits are beginning to be squeezed because of the need to consider public acceptance.

The UK Competition and Markets Authority (CMA) has publicly stated that it will review United Power's acquisition of Scottish Electricity and assess whether it constitutes a monopoly.

If the Competition and Markets Authority of the United Kingdom can approve the transaction, then United Power Group will complete the acquisition of South Scottish Power within two months. By then, British Power, the British branch of United Power Group, will have a market share of 40% in the UK!

Of course, the prerequisite is that CMA can approve this acquisition. It can be said that an acquisition of this scale is a challenge to the British concept of "liberalized market" that previously encouraged full competition.

However, in response, the Times recently published an article titled "Have the measures for the privatization of British electricity been successful?", which summarized some of the situations in Britain since Mrs. Thatcher's reform of electricity privatization, and pointed out some problems that have emerged in the reform over the past two decades.

These include the following:

First, the number of engineers has decreased. In order to improve efficiency and reduce costs, power grid companies have laid off a large number of employees, resulting in a shortage of engineers and no surplus engineering and technical personnel to participate in policy making.

Second, the participation in international cooperation and investment in technical research has decreased, and Britain's technical advantages in the international electrical field have gradually been lost, which is related to insufficient participation;

Third, there is a lack of a systematic perspective. There are almost no young generation of experts who understand how the entire power industry operates. After the split, companies only focus on their own business and have no chance to cultivate experts with a global perspective.

Fourth, while splitting up improves efficiency and competition, it also leads to an isolated structure. Whether this is conducive to long-term development requires further evaluation;

Fifth, policy decisions are more focused on economics, but the power system is complex. Economic decisions can provide a reference, but the current economic model does not have the ability to consider the overall issues of energy security and cannot make decisions that are more beneficial to the overall situation.

Sixth, cost reduction is also overdrawing the power grid. Serious equipment safety hazards have already appeared in some local areas. For example, the National Grid Company of the United Kingdom (NG) has reduced its staff and reduced costs through proactive operations. These costs are reflected in the reduction of costs in the transmission link since the reform.

In addition, in terms of British energy security, the article also mentioned that once 60% of the British electricity market was controlled by French and German companies (at that time the British distribution company was a subsidiary of the French Electricity Group), which was a threat to British energy security.

What this means is that the growth of the United Power Group, a British company, is not a bad thing for the British power industry. At least it will enable Britain to have a large power group that ranks among the top in Europe and even the world, and it will also be able to invest more resources in technology research and development in the power field...