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Electricity liberalisation in Britain: The quest for a satisfactory wholesale market design

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  • David Newbery

Abstract

Britain was the exemplar of electricity market reform, demonstrating the importance of ownership unbundling and workable competition in generation and supply. Privatisation created de facto duopolies that supported increasing price-cost margins and induced excessive (English) entry. Concentration was ended by trading horizontal for vertical integration in subsequent mergers. Competition arrived just as the Pool was replaced by New Electricity Trading Arrangements (NETA) intended to address its claimed shortcomings. NETA cost over £700 million, and had ambiguous market impacts. Prices fell dramatically as a result of (pre-NETA) competition, generating companies withdrew plant, causing fears about security of supply and a subsequent widening of price-cost margins.

Suggested Citation

  • David Newbery, 2005. "Electricity liberalisation in Britain: The quest for a satisfactory wholesale market design," The Energy Journal, , vol. 26(1_suppl), pages 43-70, June.
    • Handle: RePEc:sae:enejou:v:26:y:2005:i:1_suppl:p:43-70
    DOI: 10.5547/ISSN0195-6574-EJ-Vol26-NoSI-3
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    References listed on IDEAS

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    1. David M. Newbery, 1998. "Competition, Contracts, and Entry in the Electricity Spot Market," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 726-749, Winter.
    2. Green, Richard J & Joanne Evans, 2003. "Why did British electricity prices fall after 1998?," Royal Economic Society Annual Conference 2003 92, Royal Economic Society.
    3. Newbery, David M., 1998. "The regulator's review of the English Electricity Pool," Utilities Policy, Elsevier, vol. 7(3), pages 129-141, November.
    4. David M. Newbery, 1995. "Power Markets and Market Power," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 39-66.
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