Author Topic: Electricity Sector Restructuring Experience of Different Countries  (Read 2628 times)

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Author : Archana Singh, Prof. D.S.Chauhan
International Journal of Scientific & Engineering Research, IJSER - Volume 2, Issue 4, April-2011
ISSN 2229-5518
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Abstract— Electricity Market from economic, regulatory and engineering perspective is a very demanding system to control .There is requirement of provision of cost efficiency, lower impact of environment alongwith maintenance of security of supply for use of competition and regulation in the electricity market. Many countries due to failure of its system for adequately management of electricity companies, followed restructuring for its electricity sector. In various countries, different restructuring models were experimented but in the initial phase restructuring was opposed by the parties favouring existing vertically integrated electricity sector.  In the paper , restructuring experience of different countries are outlined .

Index Terms—Deregulation, Wholesale Electricity Market, Forward Markets, Independent system Operator, Power Exchange. 

Electric utilities have been vertically integrated mo-nopolies that have combined generation, transmission and distribution facilities to serve the needs of the cus-tomer in their service territories. The price of electricity was traditionally set by a regulatory process, rather than using market forces, which were designed to recover the cost of producing and delivering electricity to customers as well as the capital cost. Due to this monopolistic ser-vice regime, customers had no choice of supplier; and suppliers were not free to pursue outside their designat-ed service territories.  The main reason for deregulation in developing countries has been to provide electricity to customers at lower prices, and to open the market for competition by allowing smaller players to have access to the electricity market by reducing the share of large state owned utilities. On the other hand ,high growth in demand and irrational tariff policies have been the driv-ing forces for the deregulation in developing countries .Technical and managerial inefficiencies in these coun-tries have made it difficult to sustain generation and transmission expansions and hence many utilities were forced by international funding agencies to restructure their power industries[1].
Eletricity markets are having a very important characte-ristic of its organizational structure which  has been ac-commodated as the most significant change in the in-dustry. Vertically integrated industry structure (a regu-lated monopoly) as the traditional industry structure was owned and operated as a single organization for distribution, transmission, and generation functions[2]. However, the vertically integrated structure, by virtue of the fact that it is a monopolistic structure, is not amend-able to introduction of competition.
Current industry structure primarily requires separate functions of the generation and distribution (or con-sumption) from transmission as considering different functions associated with selling and buying electric energy. The reason behind separation of transmission which is the means of transporting the tradable com-modity and ability to influence the transmission- use through, for example, line ratings, line maintenance schedules and network data would be to avoid very powerful competitive advantage to a participant. Beside this, another important function is system operation which is traditionally viewed as a genera-tion/transmission function. This function has evolved to the Independent System Operator (ISO) in the most elec-tricity markets presently which is responsible for coor-dinating maintenance schedules and performing security assessment.
The deregulation processes have been started with debate for defending the vertically integrated model from opposition by private and state monopolies [3]. The first was Chile to start effort in 1980s for restructuring its electricity sector. The most discussed deregulation was the British one, with more interest in Norway Model and much attention to actions in Unites States, especially California State. In South America a major transformation took place throughout the electric power industry from 1980 onwards (chronological progressshown in fig.1).

The electricity sector reform in many developed coun-tries have already undertaken since the 1980s. Initially it was not clear to how to increase efficiency by electricity sector reform. As a matter of fact over various countries, there exists diversity in the wholesale electricity market operation. A transparent, open marketplace would encourage competition among generators and reveal the inefficiencies of the current system to improve the efficiency of the electricity sector.

Fig.1. Chronological progression of developments of power markets across the world. ( Download Full Paper to View )

2.1 Chile Market
Hydropower production in Chile varies from 60% to 95%.For supply, there are 4 Gencos with one owned by State Government. Gencos are dispatched depending on audited generation costs and reservoir levels.There are 3 Transcos and private 13 Discos. A poolco which is Eco-nomic load dispatch center (CDEC) forecasts global de-mand and updates values monthly.The system operator in charge of coordinating grid operation is run only by generators favoring the development of several private transmitters. In Chile, wholesale market includes a uni-fied market place, a transport system that “carries” power and market prices defined a spot price for each node along grid. A poolco manages dispatch, reliability and pooling functions .The National Energy Commission (CNE) provides arbitration in the case of disputes [4]. Losses including energy theft were halved in Chile within just seven years and Number of customers per distribution worker has multifolded in ten years after restructuring.

2.2 Colombia Market
Wholesale Electricity Market came into operation in July 1995. Rules promoting free competition in the generation and commercialization business were implemented. Transmission and distribution business were treated as monopolies and competitions were implemented whe-rever possible. For the reservoirs of the national intercon-nected system (NIS) defining minimum operative levels a methodology was ruled. CREG (Energy Regulation Commission Group) defined limits for the horizontal and vertical integration business. An energy stock market (generator pool) and a central operator (National Dispatch Centre) of the NIS to support its operation. Transactions between transmission and commercialization bidders are made under two modalities which are through subscription of guaranteed bilateral contracts and through direct transcations in the energy stock market ,free offer and demand .Projects of expansion plan are assigned through a scheme of public bids.There is open access to the NTS(National Transmssion System)network [5].
Transmission charges are based on connection charges and use of network charges. Evolution of the electricity sector has multifolded by significant increase in private participation.Competition in commercialization to unre-gulated users has incremented.

2.3 Argentina Market
Power sector restructuring activities in Argentina started in 1990, resulting in the enactment of the Electric Power Regulatory Frame .It created the National Regula-tory Agency (ENRE) and wholesale Power Market. Transco and Disco required license to operate. Generation developed as free activity in competition and having the transmission network as open access. Marginal declared costs was basis for dispatch  on recognition of remuneration for capacity as a function of system failure risks. Transport is organized as a monopolistic activity with national network (Transener) and six concessionaires for regional network(Distros);it included concession contract , transport tariffs based on the economic cost of  losses (node factors) and network unavailability (adaptation factors), plus network O &M costs; expansion at the expense of interested parties ;failure penalties as a function of transport charges. It was mandatory for Transport concessionaries to provide nondiscriminatory open access to their transmission system. All existing and future load must to be served by distribution concessionaries in their concession area[6]. Wholesale electricity market is undertaken by private company (Cammesa) whose share holders are the associations of generators, distributors, transporters, the national state with equal distribution of shares and the large users .

2.4 Australia Market
The process of restructuring of the electricity industry in Australia was initiated in 1991, and by 1998 a National Electricity Market was developed, where the National Electricity Management Company (NEMCO) acted as both the ISO and IMO. Generators could sell energy ei-ther by bidding in the spot market, or through formal (bilateral) contracts. The most extensive restructuring is occurring in the South Australia, Victoria, New South Wales and Queensland to form National Electricity Mar-ket (NEM).The key aspect of transition process were like elimination of barriers to entry and of barriers to trade between states, creation of pool style (bulk electricity market) competitive entities in generation and in retail supply and development of regulatory arrangements appropriate to the new regime [7].

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