Ownership vs. Regulation in Electricity Reform: The Role of Governance

• DOI: 10.2139/ssrn.807144
• Publication Date: 2011-12-28T16:29:51Z
• Authors: Richard Meade
• Keywords: Regulatory Reform

Electricity reform typically involves little regard to the possibility that customer ownership might substitute for "protections" of state ownership, or investor under regulatory safeguards, where market power is a concern. Recognising regulation itself costly, and contracting, are partly substitutable forms governance, this paper argues natural monopolies in electricity distribution (and transmission) inefficient. Unregulated these activities superior, better aligning monopolist incentives at lower cost. Even unregulated predicted balance costs than does ownership. Regulation customer-owned also shown be inefficient, imposing without compensatory gains. Examples widespread New Zealand, sometimes transmission US, illustrates how such has evolved as an effective regulation. Policy implications drawn.