Abstract
M.Ing.
Traditionally, the Electricity Supply Industry (ESI) organisational structure consisted
of generating plant, transmission and distribution networks, a regulating authority and
network control, all vertically integrated into single organisational structure. The
result of the vertically integrated organisational structure, in other words an
organisation where all the functions belong to a single organisation, and some of the
organisation's functions are not the sole responsibility of one specific functional area,
has been a captive market for the industry. No real market forces existed to control
the industry. The responsibility for the industry was traditionally left in the hands of a
single organisation, accountable only to the regulating authority. However, the
industry has recently been subjected to incredible pressure to reform. The incentive to
reform is based on various factors, ranging from sound business decisions, the need to
reduce government debt, reduction of primary energy cost for key industries to
political pressure. A common thread throughout the reform exercise is the
requirement that competition must be introduced into the ESI to ensure market forces
on the industry.
To introduce competition into the industry, the authorities often start by unbundling
the different functions in the industry. The second step is to identify the functions that
can only operate effectively as a monopoly. The authorities then need to determine
the optimum balance between regulatory rules and requirements and market forces on
the. industry. By introducing the optimum balance between industry regulation,
market forces and the specific needs of each country, the changes in the industry may
result in long term gain for the industry's host country. The gains are often measured
in reduced electricity cost and growth in industries dependant on the ESI as a primary
energy source.
The study incorporates a wide range of issues, starting with the drivers behind the
deregulation effort through management tools to regulatory rules and requirements in
the deregulated environment. The study evaluates the risks and benefits of the
deregulated market, and examines the tools adopted from the financial markets and
used in the new electricity markets. The requirement for regulatory rules will be
evident throughout the dissertation, and will be discussed in detail in the final chapter.
The study is concluded with the message that the common factors and resultant
solutions are of such a nature that it would not be necessary to develop a new set of
rules, regulations and management tools for a country starting down the road of
deregulation. It would however be required to determine the needs of the industry's
host country and to adapt the current tools and regulatory rules to the country it is
implemented in.
The final outcome of the dissertation is that the post-deregulated industry has only just
started operating under the new regulatory regime and using the newly developed
electricity markets. The industry is still subject to a severe learning curve, adapting
and developing daily to satisfy the needs of a deregulated industry. There are sections
of the industry that still need to be examined and optimised. However, the success of
some of the deregulation efforts in the industry, and especially the deregulation in the
UK confidently underwrite any equivalent exercise in the ESI.