Prior to the privatisation of the electricity industry in 1990, most electricity was generated by the Central Electricity Generating Board (CEGB), a government owned nationalised industry. It also operated the national grid transmission system. The CEGB had a statutory obligation to plan and produce electricity to meet demand. The Electricity Council set prices at levels designed to meet financial targets set by the government.

Twelve local Area Boards in England and Wales, which were also government owned monopolies, ran distribution and supply activities.

At privatisation, the fossil fuel generation within the CEGB was privatised as National Power and PowerGen. The nuclear plants transferred to the government owned Nuclear Electric, which has since been restructured into two companies, one of which has been privatised (British Energy).

Prior to 1990 there were was some competition in CEGB plants from independent power producers using conventional and renewable energy sources, and this sector has continued to grow. In addition, electricity is traded via interconnectors with the Scottish power companies and Electrcite de France (EdF).

The transmission system is now controlled by the National Grid Company, NGC, which was initially owned at privatisation by the twelve Regional Electricity Companies (RECs) but is now publicly listed. The RECs provide the systems that distribute electricity to customers, although some very large industrial users are connected directly to the national grid system. At privatisation customers consuming 1MW and over were entitled to purchase energy from any licensed supplier. In April 1994 this arrangement was expanded to include all customers taking 100kW and over, and in 1998 this further expanded to all customers.

The expansion of competition in electricity supply to all customers brought two main challenges to the Pool. Firstly, the number of customers able to choose their electricity supplier increased from 60,000 to over 23 million. Secondly, electricity settlements were to be taken from the reading of meters that do not record the electricity used each half hour period. This necessitated new trading arrangements, termed the "1998 trading arrangements", which have developed into the operational Pool’s Trading Stage 2 settlement processes. See "Supply Competition".