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Divorce comes at a price: An ex ante welfare analysis of ownership unbundling of the distribution and commercial companies in the Dutch energy sector

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  • de Nooij, Michiel
  • Baarsma, Barbara

Abstract

Vertical unbundling in the electricity sector is a hot political topic in the European Union. The European Commission has decided that the ownership unbundling of transmission networks from other stages in the value chain is the most effective way to ensure fair network access and infrastructure investment. While this European unbundling debate has not ended yet and most countries still do not have an independent transmission system operator (TSO), the Dutch government has already taken one step further. In 2008, it decided that distribution companies should be completely separated from commercial activities that are part of the same holding (generation, trade and supply). This governmental decision has been fiercely debated. Although the goal is to improve competition as well as security of supply, these benefits are uncertain. Nevertheless, it is certain that ownership unbundling comes at a cost. In this paper we present an ex ante cost-benefit analysis of the Dutch unbundling act. We conclude that it is unlikely that this act is welfare enhancing: divorce comes at a price.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 37 (2009)
Issue (Month): 12 (December)
Pages: 5449-5458

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Handle: RePEc:eee:enepol:v:37:y:2009:i:12:p:5449-5458

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Web page: http://www.elsevier.com/locate/enpol

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Keywords: Unbundling Cost-benefit analysis Electricity;

References

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  1. Giovanni Fraquelli & Massimiliano Piacenza & Davide Vannoni, 2005. "Cost Savings From Generation and Distribution with an Application to Italian Electric Utilities," Journal of Regulatory Economics, Springer, vol. 28(3), pages 289-308, November.
  2. M. Mulder & V. Shestalova, 2006. "Costs and Benefits of Vertical Separation of the Energy Distribution Industry: The Dutch Case," Competition and Regulation in Network Industries, Intersentia, vol. 7(2), pages 197-231, June.
  3. David M. Newbery, 2005. "Electricity liberalization in Britain: The quest for a satisfactory wholesale market design," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 43-70.
  4. Newbery, D.M. & Pollitt, M.G., 1996. "The Restructuring and Privatisation of the CEGB: Was It Worth It?," Cambridge Working Papers in Economics 9607, Faculty of Economics, University of Cambridge.
  5. Bushnell, James & Mansur, Erin T. & Saravia, Celeste, 2008. "Vertical Arrangements, Market Structure and Competition: An Analysis of Restructured U.S. Electricity Markets," Staff General Research Papers 13130, Iowa State University, Department of Economics.
  6. Kunneke, Rolf & Fens, Theo, 2007. "Ownership unbundling in electricity distribution: The case of The Netherlands," Energy Policy, Elsevier, vol. 35(3), pages 1920-1930, March.
  7. Baarsma, Barbara & de Nooij, Michiel & Koster, Weero & van der Weijden, Cecilia, 2007. "Divide and rule. The economic and legal implications of the proposed ownership unbundling of distribution and supply companies in the Dutch electricity sector," Energy Policy, Elsevier, vol. 35(3), pages 1785-1794, March.
  8. de Nooij, Michiel & Koopmans, Carl & Bijvoet, Carlijn, 2007. "The value of supply security: The costs of power interruptions: Economic input for damage reduction and investment in networks," Energy Economics, Elsevier, vol. 29(2), pages 277-295, March.
  9. Paul Nillesen & Michael Pollitt, 2011. "Ownership Unbundling in Electricity Distribution: Empirical Evidence from New Zealand," Review of Industrial Organization, Springer, vol. 38(1), pages 61-93, January.
  10. Michael Pollitt & Stephen Davies* & Catherine Waddams Price* & Justus Haucap & Machiel Mulder** & Victoria Shestalova & Gijsbert Zwart, 2007. "Vertical Unbundling in the EU Electricity Sector," Intereconomics: Review of European Economic Policy, Springer, vol. 42(6), pages 292-310, November.
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Citations

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Cited by:
  1. Roland Meyer, 2011. "Vertical Economies and the Costs of Separating Electricity Supply – A Review of Theoretical and Empirical Literature," Bremen Energy Working Papers 0006, Bremer Energie Institut.
  2. Milan Vondráček & Tomáš Skuček, 2010. "Unbundling costs in the energy sector: competitive environment for the customers´ benefits or too costly experiment?," Ekonomika a Management, University of Economics, Prague, vol. 2010(3).
  3. Tsatsos, Aristidis, 2012. "Die Liberalisierung des russischen Gassektors: 3 Szenarios?
    [The liberalisation of the Russian gas sector: 3 scenarios?]
    ," MPRA Paper 44623, University Library of Munich, Germany.
  4. Filippini, Massimo & Wetzel, Heike, 2013. "The Impact of Ownership Unbundling on Cost Efficiency: Empirical Evidence from the New Zealand Electricity Distribution Sector," EWI Working Papers 2013-6, Energiewirtschaftliches Institut an der Universitaet zu Koeln.
  5. de Nooij, Michiel, 2011. "Social cost-benefit analysis of electricity interconnector investment: A critical appraisal," Energy Policy, Elsevier, vol. 39(6), pages 3096-3105, June.

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