As market forces transform the IOU business model, Apple’s iPhone provides a metaphor and possible example for the industry to follow. The iUtility will emerge as companies renegotiate the...
Europe Rewired: A Giant Awakens
choice of supplier by July 2004, while residential consumers will be able to fully exercise choice of supplier three years later. Natural gas pipelines and distribution hubs will be required to open their networks to third-party shippers as well, and published tariffs will govern non-discriminatory access throughout the continent, the commission ruled.
Many nations already have adopted policies to encourage or require retail open access or customer choice regimes, although the penetration of competition in electricity varies by country (see Figure 1). The rate of change has been "incredibly fast," says Boaz Moselle, managing director for competition and trading arrangements for the British regulatory agency Ofgem. "There's been a real impact, but there are real limits," Moselle noted during a talk at the Power Generation World Europe 2003 conference in London last November. "In electricity, every market has felt the change; however, in gas, there's not yet much change on the ground."
The United Kingdom, of course, has been a pioneer in power competition, creating new market structures beginning in the late 1980s and, through trial and error, pointing the way to an understanding of how state-controlled industries can evolve into market-based regimes.
Retail competition in domestic markets is seen by many as the first-step toward full integration of markets-first by region, then throughout the expanded EU. "It means that we can look to a much bigger marketplace and expect to see electricity traded over what is a vast area compared with the opportunities that are there for us today," says David Porter, chief executive officer of the Association of Electricity Producers, a UK-based trade group. "Some of our members will be looking at the liberalization in Europe in terms of opportunities to develop new generating projects. Others may want to get into European markets to get access to retail customers."
Simon Lewis is managing director of Europe for Centrica, a retail energy services provider that is active around the world. Based on the European Commission's retail service directives, Lewis foresees full competition taking hold in Europe over the next five years, although different nations will reach the goal at different times. "My personal belief is that a 2007 timetable will come forward in some of those markets as the pressure to liberalize continues," Lewis says.
While Lewis insists he is optimistic that the proper conditions for competition eventually will reach all segments of the market, he acknowledges some formidable barriers to entry into retail markets. "As a retail new entrant, there are certain conditions we need," Lewis explains. "We need to have proper unbundling, so we can get hold of the customer. We need to have independent regulation. We need third-party access, which is critically important. We need liquid wholesale markets, because without liquid wholesale markets you are pretty dependent on the incumbents to acquire your gas and electricity. They're not exactly going to be bending over backward to encourage new entrants."
Besides promoting retail competition and liquid wholesale markets, a seamless European grid will help ensure the reliability of service and supply throughout the Continent, argues Torsten Amelung, managing director