International Opportunities

Fortnightly Magazine - January 15 1995
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Competition in electricity is part of a general trend toward deregulation (em from airlines to stock markets (em that characterized economic evolution in much of the western world during the 1980s. The move to liberalize electricity in some countries has been spurred on by the disenchantment of politicians and large customers with the traditional monopolistic arrangements. Monopoly not only prevented customer choice, but was increasingly seen as inefficient and paternalistic.

In some instances, the monopoly privilege was abused by managements and unions to institutionalize overemployment and bureaucratic behavior. In other cases, politicians used electricity customers to featherbed and subsidize national suppliers of equipment and fuel, and to subsidize particular customer groups. All of this occurred ostensibly in the name of "energy policies," but in reality to buy political support.

There are currently only four operating competitive power markets (em Argentina, Chile, England and Wales, and Norway (em and none has functioned for long. Caveats notwithstanding, the beginnings are promising. Generation efficiency in Argentina has improved. Competition has made the electricity supply industry (ESI) in England and Wales more efficient, more customer responsive, and more difficult to manipulate politically. But the experience of these countries attests to the complexity involved in creating a competitive market.

South America Leads the Way

The Allende government of 1971-74 nationalized much of Chilean industry, including the ESI. The government kept tariffs down and imposed currency restrictions, making plant spares difficult to buy. Demand increased, plant availablity decreased, and the lights flickered.

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