The arguments for and against ownership unbundling of energy transmission networks

The question this paper addresses is: what is the evidence for the superiority of the ownership unbundled transmission models (i.e. UK or Nord Pool hybrid) over other models? We assess the theoretical costs and benefits of ownership unbundling and judge these to be generally positive, though these may be potentially offset by the actual reorganisation costs of the ownership unbundling process. Next, we assess the empirical evidence. This is in two forms – econometric evidence from samples of countries and case studies of reforms in particular jurisdictions. The econometric evidence is weak due to problems with simultaneity of reform steps and a lack of studies, but the case study evidence is compelling. We conclude with a discussion of of the issues faced by countries considering implementing ownership unbundling. We conclude that evidence seems to be that ownership unbundling of transmission is a key part of energy market reform in the most successful reform jurisdictions.

[1]  J. Besant-Jones,et al.  Reforming power markets in developing countries : what have we learned? , 2006 .

[2]  G. Werden.  Does Antitrust Policy Improve Consumer Welfare? Assessing the Evidence: Comments , 2004 .

[3]  Richard Green,et al.  Benchmarking Electricity Liberalisation in Europe’Benchmarking Electricity Liberalisation in Europe , 2006 .

[4]  Cgiar Secretariat.  CGIAR Financial Report 2008 , 2001 .

[5]  Michael G. Pollitt,et al.  The restructuring and privatisation of the electricity distribution and supply businesses in England and Wales: a social cost-benefit analysis , 2005 .

[6]  F. Sioshansi,et al.  Electricity market reform : an international perspective , 2006 .

[7]  B. Baarsma,et al.  Divide and rule. The economic and legal implications of the proposed ownership unbundling of distribution and supply companies in the Dutch electricity sector , 2007 .

[8]  B. Lundvall.  Lessons for Developing Countries , 2009 .

[9]  J. Crémer,et al.  Legal vs Ownership Unbundling in Network Industries , 2006 .

[10]  Friedel Bolle,et al.  On the Allocative Efficiency of Ownership Unbundling , 2006 .

[11]  M. Slade.  Beer and the Tie: Did Divestiture of Brewer-Owned Public Houses Lead to Higher Beer Prices? , 1998 .

[12]  J. Sweeney.  The California Electricity Crisis , 2002 .

[13]  Andreas Ortmann,et al.  The Unbundling Regime for Electricity Utilities in the EU: A Case of Legislative and Regulatory Capture? , 2007 .

[14]  Michael G. Pollitt,et al.  Benchmarking Electricity Liberalisation in Europe’Benchmarking Electricity Liberalisation in Europe , 2006 .

[15]  Barry Hindess,et al.  Divide and Rule , 1998 .

[16]  J. Tirole,et al.  Transmission rights and market power on electric power networks , 1999 .

[17]  D. Newbery,et al.  The restructuring and privatisation of Britain's CEGB--was it worth it? , 2003 .

[18]  Fabio Schiantarelli,et al.  Regulation and Investment , 2003 .

[19]  Tooraj Jamasb,et al.  Electricity Sector Reform in Developing Countries: A Survey Off Empirical Evidence on Determinants and Performance , 2005 .

[20]  J. Sweeney.  California Electricity Restructuring, The Crisis, and Its Aftermath , 2006 .

[21]  M. Pollitt.  Electricity Reform in Chile. Lessons for Developing Countries , 2004 .

[22]  John E. Kwoka,et al.  Restructuring the U.S. Electric Power Sector: A Review of Recent Studies , 2008 .

[23]  Bruce Biewald,et al.  Synapse Energy Economics , 2001 .

[24]  G. Zachmann.  A Markov Switching Model of the Merit Order to Compare British and German Price Formation , 2007 .

[25]  M. Goto,et al.  Technological externalities and economies of vertical integration in the electric utility industry , 2004 .

[26]  R. Michaels.  Vertical Integration and the Restructuring of the U.S. Electricity Industry , 2004 .

[27]  M. Tsutsui,et al.  Economic impact of regulatory reforms in the electricity supply industry: a panel data analysis for OECD countries , 2004 .

[28]  C. Winston,et al.  Does Antitrust Policy Improve Consumer Welfare ? Assessing the Evidence , 2003 .

[29]  D. Finon,et al.  Reshaping european gas and electricity industries : regulation, markets and business strategies , 2004 .

[30]  M. Pollitt,et al.  Industry Restructuring, Mergers, And Efficiency: Evidence From Electric Power , 2007 .

[31]  Faye Steiner.  Regulation, Industry Structure, and Performance in the Electricity Supply Industry , 2000 .

[32]  M. Mulder,et al.  Costs and Benefits of Vertical Separation of the Energy Distribution Industry: The Dutch Case , 2006 .

[33]  Stephen Littlechild,et al.  Regulation of transmission expansion in Argentina Part I: State ownership, reform and the Fourth Line , 2004 .