IUE e chapter 9: Electricity industry restructuring and privatization lessons

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Chapter 9 uses the theory of Chapters 38 of this book to review the best known electricity industry restructuring and privatizations in the world. Examples from Norway, Sweden, Chile, Argentina, the UK, California and Texas are reviewed in the light of the theories and conclusions from chapters 38.

The earliest moves towards electricity industry restructuring and wholesale trading of electricity began in Scandinavia in 1971 with the Norwegian government’s establishment of an electricity trading pool, which eventually developed into Scandinavia’s Nord Pool, where electricity was traded wholesale between utilities in Finland, Sweden, Norway and Denmark. Soon after, and far more radically, General Pinochet in Chile started to restructure and privatize the Chilean electricity industry. In the UK Mrs Thatcher decided on a similarly radical plan and privatised all parts of the UK’s electricity industry, including the national transmission grid and a dozen nuclear power stations. The mistakes and evolution of the British electricity industry since that 1980s privatisation are summarised briefly with comments from expert participants or commentators.

While Chile, Argentina, the UK and Scandinavia are generally thought of as partial successes, progress in the USA is regarded as more mixed. Parts, such as Texas or the PJM in the north east have seen slow but progressive reform, including some vertical disintegration, wholesale electricity trading, and some retail competition offering households a real choice of supplier. California’s 1996-2001 experiment, however, was obviously a spectacular failure from which many lessons can be learned. Generally across the USA, reform of the electricity industry has stultified in the last fifteen years.

The Chapter closes by listing and reviewing the general lessons cited in Joskow’s Top Ten Tips for successful electricity industry restructuring and reform, which in turn are drawn from his and others’ experiences of electricity industry reform in more than 150 countries

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