Strategic moves at the prospect of a deregulated electricity market

Abstract

The Swedish electricity market has step by step been undergoing a deregulation process during the 1990s. In this respect it is more similar to the deregulation in England and Wales rather than the ones in Norway and Finland. At first the ownership of the national bulk transmission grid was separated from the 12 largest power companies. Thereafter, the grid was opened also to other power companies as well as to electricity distributors. In January 1996 a new Electricity Act advocating third-party access to regional and local distribution grids became operative. It is now possible for every electricity customer to choose supplier. Due to the changed environmental conditions it is of vital importance for electricity distribution companies to reorganise their business and to develop new strategies. According to the Electricity Act the operation of distribution grids must be separated from the electricity selling activities in different companies. This implies additional administration costs. But more important, the third-party access may lead to increased competition within distribution areas. This paper focuses the distributors' strategic moves at the prospect of a deregulated electricity market. It is primarily emphasising their organisational changes, customer information management and product development. What actions and decisions were taken in order to adjust to the changing conditions? How well prepared were the distributors to compete with new actors? What possibilities and threats did they see in connection with the deregulation? The study is based on personal interviews and a questionnaire sent to representatives of Swedish electricity distributors. It shows that the distributors differed regarding their preparation and readiness for the changed market conditions and that an increased market concentration may arise as a consequence of vertically and horizontally integration strategies.