Deregulation has chequered history

The lights are back after a series of blackouts in California (www.argenthotel.com) The lights are back after a series of blackouts in California (www.argenthotel.com)

Consumer concerns over electricity liberalisation have been fuelled by the experiences of other countries and in particular the state of California.

Stories about California, the richest state in America, being plunged into darkness by power cuts led many to believe that deregulation could never benefit consumers.

But energy analysts now blame poor pricing policy for the California catastrophe, and suggest that the state’s process of deregulation was conducted in such an amateur manner that it could never have worked.

In Europe, the power liberalisation picture looks somewhat different.

In Germany, deregulation has led to a rationalisation of the work force in the electricity industry, and prices have fallen for both businesses and private households.

But, although there is a choice of providers on the German market now, only 3.7 per cent of households in Germany have actually bothered to change.

In neighbouring Austria liberalisation is claimed to have saved the average family around SFr110 a year in electricity bills. Nevertheless Austrian consumers say they are confused by the many electricity offers being presented to them.

In Britain, electricity privatisation began in 1990, and since then many consumers have benefited from electricity prices, which have risen more slowly than the rate of inflation.

Scandinavian increases

But in Norway and Sweden the liberalisation process has not been so smooth. Norwegian consumers, after enjoying an initial price reduction, soon found themselves paying up to six times the price for their electricity as before deregulation.

In environmentally conscious Sweden, consumers discovered that the cheap electricity they were buying was also dirty, since it was being supplied by high polluting coal fired power stations in Poland.

Furthermore, the newly privatised Swedish providers neglected the overland power lines and cut back on maintenance personnel, leading to day-long power cuts in the middle of winter.

Latin American success story

Perhaps surprisingly, the countries of Latin America, where economic disaster often seems the norm, have had real success with electricity liberalisation.

In those countries which opted for deregulation early on, electricity is now not only more plentiful, but cheaper too, in marked contrast to the serious power shortages which were common during state control of electricity.

by Imogen Foulkes