The grin of the Cheshire cat

Cracks began to appear in the much emulated 'British Model' of electricity privatisation during 2001-2003 with the failure of electricity reforms in California, the collapse of Enron and the blackouts in North America and Europe.

by Energy Policy
Enron: dark side of electricty deregulation
Enron: dark side of electricty deregulation

An industry such as electricity is dominated by high capital costs, long lead times and a standard product. The idea that market forces would work does not take into account these factors.

From 1997 the UK government has tried to get around this problem by letting electricity companies manage the power and retail arms of their business, so that they have a guaranteed customer base to justify the high cost of capital investment.

In spite of evidence to the contrary, experts from bodies such as the World Bank and the EC still believe in electricity privatisation, although they are introducing non-market planning measures to guarantee the security of supply. All that remains of the British Model is the free market rhetoric: 'the grin of the Cheshire cat'.

In Argentina, Colombia and Chile, the old electricity companies have been destroyed by the privatisation process and the industry is in the hands of less than enthusiastic foreign companies. In 2003, global power firm AES withdrew from a hydro-electric scheme in Uganda, which had been funded by World Bank loans.

Source:
The grin of the Cheshire cat
Steve Thomas
Energy Policy, Vol 34, Issue 15, October 2006

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