Demarcating Electricity Sector Regulation and Competition Policy over Time: The Efficiency of Institutional Change

摘要

Liberalised electricity systems are typically governed by a mixture of markets, ownership (i.e. investor, government or customer), competition policy, and industry-specific regulation. This paper seeks to explain observed differences in electricity industry institutions across Australia and New Zealand in terms of the process of institutions competing to serve electricity customer preferences over time. In particular, the respective roles of competition policy (which seeks to enhance and protect competition) and industry regulation (which is commonly predicated on the absence or improbability of competition) are demarcated. Either can be construed as non-specific fall-back arrangements warranted in the face of contractual incompleteness, information asymmetries and transaction costs, the existence of which can impede efficient market-based solutions. It is argued that the evolution of these institutions, and their respective boundaries, are both path-dependent and reflect initial conditions. Moreover, the nature and origins of these institutions affects both their own evolution as well as that of the electricity sectors that they govern, and thereby economic welfare. Hence, just as the evolution of electricity sectors is affected by considerations such as political economy, market power, competition, innovation, investment irreversibility and uncertainty, so too are the key institutions affecting such sectors. The evolving boundaries between competition policy and sector-specific regulation in Australia and New Zealand are examined and compared.