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The Creation of a Market for Retail Electricity Supply

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  • Stephen Littlechild

    (University of Birmingham; Judge Business School, University of Cambridge)

Abstract

In September 1989, as part of its privatization program, the Government laid down an eight year timetable for opening up to retail competition the entire electricity market of England and Wales, phased over the period 1990-1998. It might be assumed that the Government was in a position to specify all the arrangements, and that this was part of a considered policy to facilitate the introduction and implementation of competition. But previous accounts suggest that the outcome was part of a deal between generators and regional companies to limit competition (Henney 1994), or was intended to set targets to force companies, regulators and government to come up with practical solutions (Helm 2004). The Department of Energy’s internal History of Electricity Privatisation, only now available, shows that there is merit in these last two suggestions. However, it also documents the significantly evolving views within Government as the implications of retail competition became clearer, not least for electricity contracts and for privatization of the coal industry. Initially, retail competition was hardly worth mentioning, later it was a mild concern that could be met by a small tranche of spot-price contracts, by July 1989 the plan was to introduce full competition immediately with short-term instead of long-term contracts. But the industry resisted, and in September 1989 the Government accepted the industry proposal of a franchise monopoly to enable a mix of short, medium and long-term contracts, though it insisted that the franchise should have an eight year limit. The approach may not be a model for others, but it may not be atypical of how governments actually behave in balancing conflicting objectives and practical constraints, save perhaps for the distinctive commitment to competition exhibited by the leading actors here.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Stephen Littlechild, 2010. "The Creation of a Market for Retail Electricity Supply," Working Papers EPRG 1017, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
  • Handle: RePEc:enp:wpaper:eprg1017
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    References listed on IDEAS

    as
    1. Helm, Dieter, 2004. "Energy, the State, and the Market: British Energy Policy since 1979," OUP Catalogue, Oxford University Press, number 9780199270743.
    2. Helm, Dieter, 2003. "Energy, the State, and the Market: British Energy Policy since 1979," OUP Catalogue, Oxford University Press, number 9780199262038.
    3. Defeuilley, Christophe, 2009. "Retail competition in electricity markets," Energy Policy, Elsevier, vol. 37(2), pages 377-386, February.
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    Cited by:

    1. Stern, Jon & Mirrlees-Black, Jonathan, 2012. "A framework for valuing water in England and Wales," Utilities Policy, Elsevier, vol. 23(C), pages 13-30.
    2. Özbuğday, Fatih Cemil & Öğünlü, Bilal & Alma, Hasan, 2016. "The sustainability of Turkish electricity distributors and last-resort electricity suppliers: What did transition from vertically integrated public monopoly to regulated competition with privatized an," Utilities Policy, Elsevier, vol. 39(C), pages 50-67.

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    More about this item

    Keywords

    retail competition; electricity regulation;

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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