Toward competitive and innovative energy service markets: How to establish a level playing field for new entrants and established players?

Abstract

Alfred Kahn famously (1970, pp xxxvii) said that the central, continuing responsibility of commissions and legislatures is to fi nd the best possible mix of inevitably imperfect competition and inevitably imperfect regulation. Accordingly, regulation's central goal is to establish a solid and appropriate framework for balancing public interest and entrepreneurial freedom (Picot and Landgrebe 2009). In many economic sectors, the transition from monopoly to competition has been successful. The energy markets reform to a competitive market has been the exception to the successful transition rule (Glachant and Finon 2003; Jamasb and Pollitt 2005; Joskow 2003). Especially countries that deviated from liberalization's “textbook model” (see Joskow and Schmalensee 1983), such as the US, Japan, and much of continental Europe, failed in developing ef fi cient competition in the potentially competitive electricity value chain segments (Joskow 2006, 2008).