Thinking about the future system dynamics and the process of electricity deregulation

Abstract

When an electricity sector in a country becomes deregulated, companies in the sector face an uncertain future. The transition from being a monopoly to a "commercial" company is often difficult and dangerous for the organization. In this situation, a company requires internal changes that are as big as those seen in any industry. The risk in the external environment is perceived as major, as competitors might enter the industry, customers might leave the company, and financial markets might make demands before money can be raised, etc., issues that were not part of the industry before deregulation. Furthermore, the regulation itself will most likely change significantly and become more confrontational. In this chapter, we discuss these three areas of risk that a deregulated company faces: regulatory, market, and organizational risks. We also discuss one of the methods that might help companies, System Dynamics, which with its focus on lags and feedback is well suited to help managers make sense of their new industry. © Springer Science+Business Media New York 2013.