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Electricity deregulation evidence analysis and public policy - Volume 1

Amobi, M. C. (2004). Electricity deregulation evidence analysis and public policy - Volume 1. (Unpublished Doctoral thesis, City, University of London)


The electricity industry is the most important utility; it influences the organisation of production and service delivery in all the other sectors in any economy, through that, it influences economic growth and development. That is why its efficiency attracts so much attention. The open question though, is whether unbundling, privatisation and deregulation, are the best policy dimensions that countries should follow to improve electricity sector efficiency. For the countries that choose to unbundle and to introduce competition into generation and supply segments, the regulatory reform is a very complicated process. It usually involves all the other sectors in the economy such as the judiciary, financial, the Treasury and Parliament. The interaction between these institutions during the regulatory reform influences the contractual framework, implementation processes and the initial policies that will be adopted for vesting a new regime; they also determine the successful transition to full competition in retail supply.

Chile pioneered unbundling of electricity systems and the introduction of competition into generation and supply in the late 1970s (Fisher & Galetoviz, 1998). The lack of history and data on markets meant that the public policies, which most of the other markets that emerged shortly after used were based on the results from economic theory and simulation experiments. This thesis uses a historical approach of case studies to examine the outcomes in the privatised England and Wales' electricity industry. It also uses the experience from the regional power integration regime that the Southern African Development Community (SADC) implemented in 1995, as a basis to enhance our understanding of how the initial conditions of a country can determine the methodology and process for its regulatory reform.

This thesis finds some results that allow me to raise some fundamental questions. Is there a guarantee that competition policy will lead to significant efficiency gains in ALL economies? Can price mechanism deliver production and allocative efficiency in electricity markets? Are there other options which some of the emerging and developing countries can use to improve efficiency in their electricity sector? This thesis reveals the likelihood that most Governments' will continue to play an active role in directing the conduct of the multiple agents in the system and the performance of electricity markets. They will use the Sector Regulators to do this; these agencies will use forms of limit pricing (see Joskow & Tirole, 2004) and fair-trading acts, to restrain high prices; and to prescribe codes of conduct between undertakings, in particular with regard to agreements that can inhibit the development of efficient competition. In addition to these, Governments should expect to invest a lot of regulatory input to achieve smooth transition of the regulatory reform, which means significant finance to ensure that competition regimes succeed. I find that the design, price rule and implementation methodologies that England and Wales adopted, exacerbated production and allocative inefficiency in the pool. The results suggest that the same problems might impede the success of competition policy in some of the emerging markets.

Finally, I find that the inherent features of the nation states in sub-Saharan Africa (SSA), such as the unstable socio-politics, lack of institutional framework, poor economic indices and endemic corruption, are barriers to both the development of regional power pools and the entry of foreign investors into the electricity network capacity building. Therefore, I have used the experience from the UK, to develop a theoretic model, which the SSA member states can follow to introduce regional power pools. The model will also help them to develop an environment that might encourage foreigners, as well as some of the indigenous entrepreneurs, to invest in its electricity market. Nonetheless, in the course of this research, I have had discussions with some of the public servants who are directly involved in steering forward the privatisation initiatives in Nigeria. I am aware that the wave of privatisation, which is quite intense in the sub-region, will continue; and despite the issues raised, they confirm that new regional markets are likely to emerge within the next five years.

Publication Type: Thesis (Doctoral)
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HC Economic History and Conditions
Departments: Bayes Business School
Bayes Business School > Bayes Business School Doctoral Theses
Doctoral Theses
[thumbnail of Amobi thesis 2004 Vol 1 PDF-A.pdf]
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