The standard model for electricity liberalization is the "British model", after the British system which began in the late 1980s with the privatization and vertical de-integration of the UK electricity industry. At a cost of over $3bn, a system of competition was developed to auction spare capacity through a central system. The risks involved for both generators and distributors have led to vertical re-integration.
Liberalization of electricity tends to substantially benefit large consumers (mainly industrial users), but benefits for domestic consumers compared with a public monopoly or a regulated private monopoly are questionable. There are also doubts over whether the system can ensure long-term security of supply through providing sufficient incentives to begin building generation capacity in time for when it is needed.
In the European Union, electricity markets are governed by a Europe-wide directive on liberalization. In 2003, the European Commission introduced a new Electricity Directive (EC/2003/54/EC) with much stronger requirements on competition.
Steve Thomas (2004), Electricity liberalisation: The beginning of the end, PSIRU, University of Greenwich [1] (http://www.psiru.org/reports/2004-09-E-WEC.doc)
As electricity supply is a natural monopoly, this entails complex and costly systems of regulation to enforce a system of competition.
The standard model for electricityliberalization is the "British model", after the British system which began in the late 1980s with the privatization and vertical de-integration of the UK electricity industry.
Liberalization of electricity tends to substantially benefit large consumers (mainly industrial users), but benefits for domestic consumers compared with a public monopoly or a regulated private monopoly are questionable.
The lesser degree of electricityliberalization, and thus its intergovernmentalism, was evident in the wide discretion that the electricitydirective of 1996 accorded to member states.
All in all, while the movement towards liberalization was consistent across the two periods, the creation of an EU regime for electricity in 1996 had an impact on the extension of the goals of competition for consumers by introducing eligibility for small consumers.
Liberalization at the national level in electricity moved swiftly beyond the requirements of the EU regime and, as has already been argued, before the EU followed these developments with the most recent regime change in the sector.
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