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Competition in European Electricity Markets

A Cross-country Comparison

Edited by Jean-Michael Glachant and Dominique Finon

This book focuses on the diversity of electricity reforms in Western Europe, drawing evidence from ten European Union memberstates plus Norway and Switzerland as associate members. The contributors analyse the various ways of introducing competition in the European electricity industries, and consider both the strategies of electricity companies and their behaviour in electricity marketplaces. They also offer an explanation of the differences of reforms by the institutions and the industrial structures of each country which shape the types of marketrules, industrial restructuring and public service regulations which have been adopted.
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Chapter 11: Introducing Competition in the French Electricity Supply Industry: Erosion of the Public Hierarchy by the European Institutional Integration

Dominique Finon


Dominique Finon INTRODUCTION In February 2000 France, compelled by the 1996 European Directive 96/92, undertook a minimal reform of the organization of its electricity industry, while preserving the boundaries of the incumbent company.1 The reform lays on the existing integrated structure a rule of third party access (TPA) to the network, which allows bilateral direct sale arrangements on a limited segment of eligible consumers, without any other notable changes of the industrial structure. In keeping with its original position at the beginning of the 1990s, the French government has not wished to undermine an industrial organization that it considers to be economically and socially efficient. Is this structure, however, really all that stable? The theoretical model of network industry liberalization considers that the introduction of limited rules of competition into a previously integrated industry triggers a process of destabilization, towards a deintegrated and stable form (Gilbert, Kahn and Newberg, 1996). The change of rules provokes interest from potential entry candidates demanding developments that limit the advantage to the historical operator. In addition, it creates tension between competition-based logic and logic of the incumbent’s dominant position. The dominant position of the historical operator shows in a number of barriers to entry: asymmetry of costs, manipulation of conditions of network access, cross-subsidies between different segments of the market, various commercial advantages (Armstrong, Cowan and Vickers, 1994). Some of these can be controlled by the regulator, but others cannot, and this discourages bilateral exchanges. As abuse of the dominant position is...

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