England and Wales electricity industry – experiences in deregulation

Abstract

Electric utilities traditionally operate as government monopoly institutions in vertically integrated structures. As monopolies, secondary costs incurred as a result of inefficient operations are passed down to consumers, even when such did not constitute major operational or quality of supply problems. In the 1990s, environmental issues, regulatory and economic challenges, and changing public perception created a radically different world for electric utilities. Consumers demand price transparency and reduction of cross‐subsidies among different users. The need for higher energy efficiency in technical systems of utilities and significant growth in energy demand were recognised. Most governments were under pressure to raise funds for social services, balance budgets and to carry out economic reform. This paper presents a review and analysis of the successful deregulation of the electricity supply industry in England and Wales as a pointer to other countries (e.g. developing countries) contemplating such programme.