Citation:
Abstract:
Excerpt from the introduction:
To the extent that any industry is central to the prosperity of economies and to social welfare, it is the energy industry, and particularly the electricity industry. The availability of electric supply is essential for both economic development and quality of life. It is also a critical requirement for human development. By its very nature, the energy services industry in general and the electricity industry in particular is capital intensive, technologically sophisticated, and, in developing countries as well as in many developed ones, highly dependent on foreign trade, services, and investment. That dependence derives from, among other things, lack of sufficient domestic capital, lack of trained personnel, and the fact that manufacturing of needed technology and fuel is often located outside the national boundaries of most developing countries. As a result, the development of the electricity industry, whose purpose is focused on domestic needs, is inextricably linked to the global flow of capital, equipment, fuels, and services. The result is that the regulatory regime designed to meet the requirements of the domestic market is inevitably compelled to interface with international trade and the rules surrounding it. The energy services industry, like all network-dependent businesses (e.g., natural gas, water, and railroads), has elements that are monopolistic in nature and other aspects that are suitable for competition. Monopolistic aspects of the industry, which may vary from one jurisdiction to another, cannot simply be left to the market. Doing so would permit abuses of monopoly power, including extracting very high rents, tolerating unacceptably low levels of service quality and productivity, and precluding the evolution of viably competitive markets. Thus, the centrality of electricity to the economy, combined with the unavoidable monopoly aspects of the industry , invites some measure of State regulation. The question governments face is not whether to regulate, but how and how much to regulate.