April 27, 2005

Vertical separation of the energy-distribution industry; an assessment of several options for unbundling

Kosten en baten van splitsing energiebedrijven nog onzeker

Press release
Het is niet duidelijk of het splitsen van energiebedrijven in publieke netwerkbedrijven en commerciële productie- en handelsbedrijven per saldo welvaartswinst oplevert. Splitsing kan diverse voordelen hebben; het is echter onduidelijk hoe groot die voordelen zullen zijn.

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We compare the proposal to the current situation and to two alternative options that strengthen legal unbundling. We identify four mutually-related categories of benefits: better performance of networks, more efficient regulation, improved effectiveness of competition, and benefits of privatisation; and three categories of costs: one-off transaction costs, loss of economies of scope and the risk of less investment in generation.

The analysis highlights that the benefits depend on the future development in small-scale generation and on allocation of the management of transmission networks. Mainly because of the uncertainty about the future role of small-scale generation and the uncertainty about the magnitude of the one-off transaction costs related to cross-border leases, the net welfare effect of ownership unbundling at the distribution level is ambiguous. We identify an alternative route for achieving some of the benefits considered.

Authors

Machiel Mulder
Victoria Shestalova
Mark Lijesen