Chapter 5: Privatization and Regulation of Competition in the Electricity Sector
Lucas A. Skoufa The privatisation and reform of electricity supply industries in many countries around the world has seen a transformation in the thinking of senior management of organisations had to become more commercially focused. For these privatised firms the old paradigm of meeting government obligations is no longer an objective, in a commercial world maximising shareholder wealth is now important. For almost a century beforehand electricity sectors in most countries around the world were ‘natural monopoly’ industries where government or private suppliers were subjected to regulation based on prices entry, investment, service quality, and other aspects of a firm’s behaviour (Joskow 1998). Privatisation and reform has meant that ownership of generation firms has either moved to the private sector or been retained by governments; government owned electricity is now expected to run like a business. Whatever the style of ownership of electricity firms the spectre of regulation has been such that it is a major consideration in a firm’s strategic choices and behaviours. There is a lack of strategic planning literature of firms in regulated environments which has been acknowledged by Mahon and Murray (1981); Smith and Grimm (1987); Reger et al. (1992); Russo (1992); Parker (2002) and Bonardi (2004). It is the intention of this chapter to address some of the issues involved with this. The general issues involved with regulation are presented first in this chapter and then regulation with regards to electricity generation firms is discussed. Thereafter a ‘Governance-Strategic Choice (GSC) Framework’, which is meant to...
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