Broken dreams: Unmet expectations of investors in the Philippine electricity restructuring and privatization

Over the last three decades, privatization and restructuring of electricity sectors has been a hot topic. The expectation was that prices would fall due to increased competition and that generators would become more innovative and efficient. However, the enthusiasm for deregulation wavered after events such as the debacle in California, the fall of Enron and the setbacks of Ontario. In the Philippines, comprehensive legislation was passed in 2001 but the implementation has been rather slow and controversial. This paper looked at the allegation of politicizing power rates and found a logical alternative to the perceived conspiracy angle. Based on market data, it is highly probable that depressed market rates was a result of coping mechanisms of new players trying to adjust to the restructured industry.     

Initial state regulation of investor-owned utilities

This paper examines state initiation of public service (or utility) commission regulation of investor-owned utilities (IOUs) using an economic theory of regulation. The decision to regulate IOUs is assumed to have depended on the strength of competing interest groups, e.g. consumers and producers, and on institutional factors, e.g. whether commissioners were appointed or elected. Regulators, which then had jurisdiction over IOU rates, are assumed to have been optimizing agents. The potential benefits of regulation, in turn, translated into pressure to initiate regulation. To test this, a hazard model is applied to state-level data. On the demand side of the regulation market, the distribution of federal power and population density were unrelated, while a set of time dummies was positively related to the probability that a state initiated regulation. On the supply side, the fraction of the population that was urban and whether the governor was Republican or not were positively and negatively related to this probability.     

The prerequisite for competition in the restructured wholesale Saudi electricity market

Protection of customers against monopoly is the first and main objective of the Saudi Electricity and Co-generation Regulatory Authority (ECRA). The second important objective, as recommended by the present study, is regulating natural monopoly businesses [Saudi electricity national grid (SENG) and Saudi electricity distribution (SED)] in addition to promoting real competition in competitive businesses [power supply providers (PSPs) and customer service providers (CSPs)]. Another four main objectives of ECRA are to promote the efficient use of energy and natural resources, to ensure a reasonable rate of return for PSPs and CSPs and at the same time to be fair to end-users, to ensure reasonable charges to SENG and SED services to be adequate for them to run the organization in a break-even manner and to maintain the system's security and reliability. The present paper discusses the way to improve and restructure the Saudi electricity market.     

Reforming regulation of electric utilities in the USA Priorities for the 1980s

The electric utility industry in the USA has been forced to face its transition to an era of slower growth while dealing with an increasingly extensive, complex and rigid regulatory framework. Traditional ‘public utility’ regulation is ill-suited to a period of radical change. The addition of environmental regulations, more stringent controls on nuclear power, and in some states separate energy policy agencies has aggravated the task. This article explains this problem and calls for radical reform, preferably placing more reliance on market forces.     

Information technology and efficient pricing Providing a competitive edge for electric utilities

Electricity has traditionally been generated and sold as a homogeneous commodity with a single price. This practice has less to do with the nature of electricity than with the lack of technology to distinguish among each kilwatthour based on what- and when - it is used. This article argues that with the recent advances in information and communication technologies, the time has arrived to market electricity as something other than a homogeneous commodity. By pricing electricity according to its time-of-use, for example, electricity will be more efficiently utilized, benefitting both the customers and the electric companies.     

Expanding opportunities: Strategic buying of utilities in new EU member states

During the 1990s, limited investment opportunities in Western Europe, the opening of the energy markets in Eastern Europe, and the future expansion of the European Union (EU) prompted an expansionist strategy by energy companies from the original EU member states. In this paper, the acquisition and divestiture activities and strategies of utilities from France and Germany are analyzed in the context of the 2004 and 2007 EU enlargements. Through quantitative and qualitative data analysis, including the development of two case studies, the strategy for expansion and evolution in new member states is examined. The results demonstrate a concerted effort to establish economies of scale through ownership of distribution companies. A change in strategy occurs as these privatization opportunities disappear. Generation and trading activity become the growth area for these companies as electricity supply becomes another factor that can contribute to the economies of scale. Recent EU-supported efforts towards regionalization of electricity markets, positions these companies well due to their strong regional presence. This paper will explore these issues in the context of ownership and geographic distribution.     

Service quality in the electricity industry: The role of privatization and managerial behavior

This paper analyzes the relationship between privatization and service quality in the electricity industry, and tests the hypothesis that managerial behavior is a significant intervening factor. The sample includes 31 Italian distributors over the period 1998–2004; their quality performance is represented by continuity of supply, an aspect of quality that is both contractible and regulated. Results of the empirical analysis suggest that the transfer of shareholdings to private investors does not lead to quality degradation. The results also suggest that managerial dominance translates into a reduction in supply quality; this effect is likely to be particularly strong for public-sector utilities.     

Oil policies and privatization strategies in Mexico: implications for the petrochemical sector and its production spaces

Through a retrospective analysis of Mexico's oil history, this work examines the privatization processes that occurred in the petrochemical sector, from the abolishment of the government's monopoly, Petróleos Mexicanos (PEMEX) during the 1980s, until the restructuring and open liberalization in the early 1990s, focusing on the areas incorporated to production processes, particularly along the Gulf coast. As a result of the industrial policies and regional development strategies promoted by the government from the sixties, oriented towards strengthening production in areas with the highest potential, attractive business investment areas were developed. These included southern Tamaulipas, a strategic region where a number of industrial factors facilitated access to raw materials at competitive prices, as well as their processing and distribution to local and international markets, all of these within a single location. The strategic nature of the petrochemical location and production have made southern Tamaulipas a key factor for the territorial shaping and industrial development linked to the behavior of transnational companies that, seeking comparative advantages, have relocated parts of their production capacity in this region.     

Deregulation as a switch of regime: Price effects using a modified Hotelling rule

Concern over rising energy prices has led to support for government intervention to regulate the price of domestic non-renewable energy resources. However, US policy makers appear to be looking more towards competition, rather than regulation, to decide who will provide energy resources and how these will be priced. This paper models possible dynamic price effects occasioned by the removal of a regulatory constraint. The analysis focuses on a government decision to eliminate binding price ceilings on a non-renewable (energy) substitute when the incumbent resource is monopolistically controlled (using deregulation of natural gas as an illustration). Under certain conditions it is shown that one will get continuity of marginal revenue and a fall in the world price following decontrol (the expiration of a patent or a decision to grant mineral rights on federal land). In general, however, the model suggests that both marginal revenue and prices will be discontinuous and that the discontinuity is likely to result in a fall in price.     

The future of electric two-wheelers and electric vehicles in China

The method of force field analysis is used to examine the future technological and market evolution of electric two-wheelers (E2W) in China. The authors identify key forces driving and resisting future E2W market growth, root causes behind these forces, and important insights about the likelihood of a wide shift to larger three- and four-wheel electric vehicles (EV). The authors conclude that the key forces driving E2W market growth are: improvements in E2W and battery technology due to product modularity and modular industry structure, strong local regulatory support in the form of gasoline-powered motorcycle bans and loose enforcement of E2W standards, and deteriorating bus public transit service. The largest forces resisting E2W market growth are strong demand for gasoline-powered motorcycles, bans on E2Ws due to safety concerns in urban areas, and growing support for public transit. The balance of these forces appears to favor E2W market growth. This growth will likely drive vehicle electrification through continued innovation in batteries and motors, the switch from lead-acid to Li-ion batteries in E2Ws, and the development of larger E2Ws and EVs. There are however strong forces resisting vehicle electrification, including battery cost, charging infrastructure, and inherent complications with large battery systems.     

Energy conservation and emission reduction policies for the electric power industry in China

Because of China's increasingly limited energy supplies and serious environmental pollution, much attention has been paid to conserving energy and reducing emissions to help the country's economy achieve sustainable development. As the electric power industry is the largest consumer of coal resources in China and also emits high levels of air pollutants each year, the Chinese government has enacted many technical and economic policies for energy conservation and emission reduction in the last few years. These policies are summarized in this paper, along with relevant laws and medium- and long-term plans, all of which address ideas such as adjusting the power generation mix, promoting demand-side management, introducing energy-efficient scheduling, and installing desulfurization units. The paper also assesses the results of these policies by analyzing several key indicators of energy consumption and emissions. The analysis shows that although some progress has been made in conserving energy and reducing emissions, substantial work is still required for China to catch up with developed countries. Some suggestions for future work are provided.     

Core business concentration vs. corporate diversification in the US electric utility industry: Synergy and deregulation effects

Many economists such as Wilson (2002) [Wilson, R., 2002. Architecture of power market, Econometrica, 70, 1299–1340] have considered that there are similarities between electricity and gas services in the US electric utility industry. Hence, they expect a synergy effect between them. However, the two businesses do not have technology similarities at the level that the gas service produces a synergy effect with electricity. To examine whether there is a synergy effect of corporate diversification in the industry, we compare electricity-specialized firms with diversified utility firms in terms of their financial performance and corporate value. The comparison indicates that core business concentration is more effective for electric utility firms than corporate diversification under the current US deregulation policy.     

From state monopoly to renewable portfolio: Restructuring China's electric utility

Deregulation and decentralization in the electricity sector have thrived worldwide since the early 1980s. China also started restructuring its electricity industry since the mid-1980s. The reform shares many common features with restructuring practices in other countries and exhibits some unique characteristics as well. To some extent, two features, namely governmental administrative departments’ dual role of government and business inherited from a highly centralized planned economy, and the coal-intensive nature of power generation, has determined many aspects of the evolution of China's electric power sector. This paper aims to provide a comprehensive account of the process with some emphasis on recent developments. We also identify some of the features that are similar to electricity market reforms in other countries and, most importantly, those that characterize the uniqueness of the restructuring practices in China's electricity industry through investigating the administrative framework, price and investment mechanisms, and associated legislation and policy settings at each of the five stages in the evolution of the electric utility sector. The paper concludes with a discussion and summary of some generic characteristics and remaining challenges.     

Operational synergy in the US electric utility industry under an influence of deregulation policy: A linkage to financial performance and corporate value

Sueyoshi et al. (2009) have examined a synergy effect between electricity and gas services in the US electric utility industry. They have compared electricity-specialized firms with diversified utility firms in their financial performance and corporate value. A problem of their study is that it has not empirically measured the operational performance of the electric utility firms. As an extension of the preceding study, this research investigates the operational performance of 104 US electric utility firms (1990–2004) by fully utilizing DEA (Data Envelopment Analysis). This study finds the three new policy implications. First, the synergy effect has not existed in the operational performance of diversified utility firms before and after the deregulation on the US electricity markets. Thus, core business concentration is more effective for electric utility firms than corporate diversification to enhance their operational performance under the current US deregulation policy. Second, the operational performance has had an increasing trend until 1996 and a decreasing trend after 1996. Thus, the US deregulation policy has been influential on their operational performance. Third, the enhancement in operational performance of electric utility firms has improved their financial performance. The improvement in financial performance has increased their corporate value. Thus, this study finds the business causality among operational performance, financial performance and corporate value in the US electric utility industry.     

Diffusion of technology for electric utilities in the European union

We analyze determinants of technology diffusion in the European electric utility sector during the period 1950–1992. Structural, economic, technological, and institutional features were introduced into a hazard model. Kaplan-Meier functions were used for non-parametric estimations.     

Energy policy and the privatization of the UK energy industries

This article considers a number of issues arising from or associated with the UK government's policy of privatization/liberalization of the public sector industries in relation to the formulation and implementation of energy policy. The analysis presented suggests that, if the policy of privatization progresses very far, there may be a change in the weights attached to various instruments used for the implementation of energy policy.     

Relationship between the economic cost and the reliability of the electric power supply system in city: A case in Shanghai of China

This paper presents a model to quantify the impact of electric power outages on GDP by using Cobb–Douglas production function to develop an economic relationship between the reliability of the electric power supply system and the cost of electric energy unserved. Our findings show that average costs for providing a stable power supply are much lower than disruption costs, which is supported by recurring to the data available of Shanghai. Estimated by using Shanghai’s macroeconomic data of 1990–2006, this relationship indicates that the impact of electricity service disruption on Shanghai’s GDP is about 48.18 × 10⁸ CNY in 2006, matching an alternative “back-of-envelope” estimate of 50.91 × 10⁸ CNY. The estimated costs per kWh unserved are 1.81–10.26 CNY in 1990–2006, mirroring the increasing importance of electricity in the period’s economic development. These results demonstrate the usefulness of our approach for quantifying the reliability benefits of investments in electricity infrastructure.     

Government policy and the development of electric vehicles in Japan

The aim of this paper is to analyse the role that the Japanese Government has played in the development of alternatives to conventional vehicles, the effect of government programmes, and the importance of technical flexibility in government support schemes. The focus is on battery-powered electric vehicles (BPEVs), hybrid electric vehicles (HEVs), and fuel cell electric vehicles.