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The unbundling regime for electricity utilities in the EU: A case of legislative and regulatory capture?

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  • van Koten, S.
  • Ortmann, A.

Abstract

Theory and empirics suggest that by curbing competition, incumbent electricity companies which used to be, and here are referred to as, Vertically Integrated Utilities (VIUs), can increase their profitability through combined ownership of generation and transmission and/or distribution networks. Because curbing competition is generally believed to be welfare-reducing, EU law requires unbundling (separation) of the VIU networks. However, the EU allows its member states the choice between incomplete (legal) and complete (ownership) unbundling. There is tantalizing anecdotal evidence that VIUs have tried to influence this choice through questionable means of persuasion. Such means of persuasion should be more readily available in countries with a more corrupted political culture. This paper shows that among the old EU member states, countries which are perceived as more corrupt are indeed more likely to apply weaker forms of unbundling. Somewhat surprisingly, we do not obtain a similar finding for the EU member states that acceded in 2004. We provide a conjecture for this observation.

Suggested Citation

  • van Koten, S. & Ortmann, A., 2008. "The unbundling regime for electricity utilities in the EU: A case of legislative and regulatory capture?," Energy Economics, Elsevier, vol. 30(6), pages 3128-3140, November.
  • Handle: RePEc:eee:eneeco:v:30:y:2008:i:6:p:3128-3140
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    References listed on IDEAS

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    Cited by:

    1. Mačanga Martin & Plešivčák Martin, 2014. "Geographical context of energy prices in the European Union Member States with special emphasis on the Slovak Republic," Bulletin of Geography. Socio-economic Series, De Gruyter Open, vol. 24(24), pages 1-25, June.
    2. van Koten, Silvester, 2012. "Merchant interconnector projects by generators in the EU: Profitability and allocation of capacity," Energy Policy, Elsevier, vol. 41(C), pages 748-758.
    3. Lopes Ferreira, H. & Costescu, A. & L'Abbate, A. & Minnebo, P. & Fulli, G., 2011. "Distributed generation and distribution market diversity in Europe," Energy Policy, Elsevier, vol. 39(9), pages 5561-5571, September.
    4. Antonio Estache & Liam Wren-Lewis, 2011. "Anti-Corruption Policy in Theories of Sector Regulation," Chapters,in: International Handbook on the Economics of Corruption, Volume Two, chapter 9 Edward Elgar Publishing.
    5. van Koten, Silvester & Ortmann, Andreas, 2013. "Structural versus behavioral remedies in the deregulation of electricity markets: An experimental investigation motivated by policy concerns," European Economic Review, Elsevier, vol. 64(C), pages 256-265.
    6. Lindemann, Henrik, 2015. "Budgetary Interests and the Degree of Unbundling in Electricity Markets - An Empirical Analysis for OECD Countries," Hannover Economic Papers (HEP) dp-543, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    7. Estache, Antonio & Wren-Lewis, Liam, 2010. "What Anti-Corruption Policy Can Learn from Theories of Sector Regulation," CEPR Discussion Papers 8082, C.E.P.R. Discussion Papers.
    8. Bolle, Friedel & Breitmoser, Yves, 2006. "On the Allocative Efficiency of Ownership Unbundling," Discussion Papers 255, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
    9. Pollitt, Michael, 2008. "The arguments for and against ownership unbundling of energy transmission networks," Energy Policy, Elsevier, vol. 36(2), pages 704-713, February.
    10. Nechvátal, Ivan & Pilavachi, Petros A. & Kakaras, Emmanuel, 2012. "The role of the European Union in private law relations of organizations operating in the internal electricity or gas market in medium and small size Member States," Energy Policy, Elsevier, vol. 51(C), pages 535-543.
    11. repec:eee:rensus:v:82:y:2018:i:p3:p:3623-3632 is not listed on IDEAS
    12. Silvester Koten, 2013. "Legal unbundling and auctions in vertically integrated (utilities) markets," European Journal of Law and Economics, Springer, vol. 36(3), pages 543-573, December.
    13. repec:eee:juipol:v:50:y:2018:i:c:p:13-25 is not listed on IDEAS
    14. Testa, Federico & Stagnaro, Carlo, 2011. "Reti di trasporto nazionale e concorrenza nei mercati del gas: il caso Eni-Snam Rete Gas
      [Networks and competition in natural gas markets: the case of Eni-Snam Rete Gas]
      ," MPRA Paper 48698, University Library of Munich, Germany.
    15. Lindemann, Henrik, 2015. "Does Regulatory Independence Translate into a Higher Degree of Liberalization? - Evidence from EU Energy Regulators," Hannover Economic Papers (HEP) dp-545, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    16. Vagliasindi, Maria, 2012. "Power market structure and performance," Policy Research Working Paper Series 6123, The World Bank.

    More about this item

    Keywords

    Electricity markets Regulation Vertical integration Corruption;

    JEL classification:

    • K49 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Other
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy

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