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The arguments for and against ownership unbundling of energy transmission networks

  • Pollitt, Michael

The question this paper addresses is: what is the evidence for the superiority of the ownership unbundled transmission models (i.e. UK or Nord Pool hybrid) over other models? We assess the theoretical costs and benefits of ownership unbundling and judge these to be generally positive, though these may be potentially offset by the actual reorganisation costs of the ownership unbundling process. Next, we assess the empirical evidence. This is in two forms – econometric evidence from samples of countries and case studies of reforms in particular jurisdictions. The econometric evidence is weak due to problems with simultaneity of reform steps and a lack of studies, but the case study evidence is compelling. We conclude with a discussion of of the issues faced by countries considering implementing ownership unbundling. We conclude that evidence seems to be that ownership unbundling of transmission is a key part of energy market reform in the most successful reform jurisdictions.

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Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 36 (2008)
Issue (Month): 2 (February)
Pages: 704-713

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Handle: RePEc:eee:enepol:v:36:y:2008:i:2:p:704-713
Contact details of provider: Web page: http://www.elsevier.com/locate/enpol

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  1. Green, R. & Lorenzoni, A. & Perez, Y. & Pollitt, M., 2006. "Benchmarking Electricity Liberalisation in Europe’Benchmarking Electricity Liberalisation in Europe," Cambridge Working Papers in Economics 0629, Faculty of Economics, University of Cambridge.
  2. Silvester van Koten & Andreas Ortmann, 2007. "The Unbundling Regime for Electricity Utilities in the EU: A Case of Legislative and Regulatory Capture?," CERGE-EI Working Papers wp328, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
  3. Nicoletti, Giuseppe & Ardagna, Silvia & Alesina, Alberto & Schiantarelli, Fabio, 2005. "Regulation and Investment," Scholarly Articles 2579825, Harvard University Department of Economics.
  4. M. Pollitt, 2004. "Electricity reform in Chile. Lessons for developing countries," Competition and Regulation in Network Industries, Intersentia, vol. 5(3), pages 221-263, September.
  5. Faye Steiner, 2001. "Regulation, industry structure and performance in the electricity supply industry," OECD Economic Studies, OECD Publishing, vol. 2001(1), pages 143-182.
  6. Robert W. Crandall & Clifford Winston, 2005. "Does antitrust policy improve consumer welfare? Assessing the evidence," Chapters, in: Governments, Competition and Utility Regulation, chapter 2 Edward Elgar.
  7. Joskow, Paul L & Tirole, Jean, 1999. "Transmission Rights and Market Power on Electric Power Networks I: Financial Rights," CEPR Discussion Papers 2093, C.E.P.R. Discussion Papers.
  8. Domah, P. & Pollitt, M.G., 2000. "The Restructuring and Privatisation of Electricity Distribution and Supply Businesses in England and Wales: A Social Cost Benefit Analysis," Cambridge Working Papers in Economics 0007, Faculty of Economics, University of Cambridge.
  9. 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.
  10. Hattori, Toru & Tsutsui, Miki, 2004. "Economic impact of regulatory reforms in the electricity supply industry: a panel data analysis for OECD countries," Energy Policy, Elsevier, vol. 32(6), pages 823-832, April.
  11. Cremer, Helmuth & Crémer, Jacques & De Donder, Philippe, 2006. "Legal vs Ownership Unbundling in Network Industries," CEPR Discussion Papers 5767, C.E.P.R. Discussion Papers.
  12. 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.
  13. Georg Zachmann, 2007. "A Markov Switching Model of the Merit Order to Compare British and German Price Formation," Discussion Papers of DIW Berlin 714, DIW Berlin, German Institute for Economic Research.
  14. Jamasb, Tooraj & Mota, Raffaella & Newbery, David & Pollitt, Michael, 2005. "Electricity sector reform in developing countries : a survey of empirical evidence on determinants and performance," Policy Research Working Paper Series 3549, The World Bank.
  15. Slade, Margaret E, 1998. "Beer and the Tie: Did Divestiture of Brewer-Owned Public Houses Lead to Higher Beer Prices?," Economic Journal, Royal Economic Society, vol. 108(448), pages 565-602, May.
  16. Preetum Domah & Michael G. Pollitt, 2001. "The restructuring and privatisation of the electricity distribution and supply businesses in England," Fiscal Studies, Institute for Fiscal Studies, vol. 22(1), pages 107-146, March.
  17. Kwoka, J. & Pollitt, M., 2007. "Industry Restructuring, Mergers, And Efficiency: Evidence From Electric Power," Cambridge Working Papers in Economics 0725, Faculty of Economics, University of Cambridge.
  18. Littlechild, S.C. & Skerk, C.J., 2004. "Regulation of transmission expansion in Argentina Part I: State ownership, reform and the Fourth Line," Cambridge Working Papers in Economics 0464, Faculty of Economics, University of Cambridge.
  19. Newbery, David M & Pollitt, Michael G, 1997. "The Restructuring and Privatization of Britain's CEGB--Was It Worth It?," Journal of Industrial Economics, Wiley Blackwell, vol. 45(3), pages 269-303, September.
  20. Nemoto, Jiro & Goto, Mika, 2004. "Technological externalities and economies of vertical integration in the electric utility industry," International Journal of Industrial Organization, Elsevier, vol. 22(1), pages 67-81, January.
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