What are some approaches to regulation adopted in recent decades by national governments, and the implications for management making international investment decisions?
Electricity in Europe And North America: The Grand Experiment
Has restructuring succeeded on either continent?
In 1984, the world of electricity was organized along the lines of a common model based on a shared belief that a specific industry structure was implied by the prevailing electric technology and financial requirements of the industry. A little over two decades later, the principles of the “Ten Point Plan” issued by the Illinois Commerce Commission are manifest in public policy and industry practice in both of the great federal politico-economic systems of the North Atlantic (see sidebar, “The Original ‘Ten Point Plan’ of 1984”) .
The European Union has promulgated competitive energy market policy directives for electricity that individual member states have implemented to widely varying degrees. 1 The United Kingdom, the Netherlands and the Scandinavian countries fully have implemented retail open access, while others have gone part of the way, allowed access nominally, or done relatively little. The EU is rife with internal controversy over large utility mergers and issues of de-verticalization.
An important feature of the development of the competitive model in Europe has been massive transfers of utility assets in some member states from government ownership to investor-owned status. In North America, while there has been less need for privatization, there has been, as in Europe, significant consolidation and streamlining of traditional utilities, as well as of competitive generation. As has been true in other competitizing network industries, commercial and industrial electricity customers generally have been the first movers in taking advantage of competitive options. Residential retail markets have tended to lag from place to place depending on rules of the game and other factors, including transaction costs.