Table of Contents

Regulation, Deregulation, Reregulation

Regulation, Deregulation, Reregulation

Institutional Perspectives

Advances in New Institutional Analysis series

Edited by Claude Ménard and Michel Ghertman

Building on Oliver Williamson’s original analysis, the contributors introduce new ideas, different perspectives and provide tools for better understanding changes in the approach to regulation, the reform of public utilities, and the complex problems of governance. They draw largely upon a transaction cost approach, highlighting the challenges faced by major economic sectors and identifying critical flaws in prevailing views on regulation. Deeply rooted in sector analysis, the book conveys a central message of new institutional economics: that theory should be continuously confronted by facts, and reformed or revolutionized accordingly.

Chapter 9: The Achievement of Electricity Competitive Reforms: A Governance Structure Problem?

Jean-Michel Glachant and Yannick Perez

Subjects: economics and finance, institutional economics


Jean-Michel Glachant and Yannick Perez INTRODUCTION The competitive reform of electricity industries has recently experienced a surge of expansion worldwide, with over 200 new instances of sectorial deregulation between 1990 and 2008 (Glachant and Finon, 2003; World Bank, 2006; Sioshansi and Pfaffenberger, 2006; Glachant and Lévêque, 2009). Nonetheless, subsequent to the California electricity crisis (2000–2001), there has been a burgeoning dissatisfaction with regard to the limitations, and in some cases failures,1 of these new ways of framing electricity industries (Kessides, 2004). We are witnessing a slowdown or, in some cases, a blocking of the reforms, as if the progression of competition policy in electricity industries had a cyclical component. This brings us to a deeper reflection on the nature of these processes. Previously, the unique characteristics of electricity industries appeared to set them apart from most other industries, deemed ‘competitive’. These electricity industries notably feature: significant economies of scale or scope (extending to natural monopolies); far-reaching externalities (positive or negative) in production or consumption; and extensive vertical and horizontal integration (either under a single corporate umbrella or in the form of long-term ad hoc contracts). Within this very specific framework, the successful introduction of competitive mechanisms, substituting for administered regulation or internal corporate management hierarchies, along with the creation of open markets either up- or downstream of the formerly integrated networks, created disruptions and innovations in equal measure (Joskow and Schmalensee, 1983; Baumol and Sidak, 1994). The purpose of this chapter is to propose tools for...

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