Regulation and competition without privatization: Norway`s experience
The competitive market for the hydro-based Norwegian electricity system is working well, with end-user prices only slightly above the wholesale market. Pool prices are reflecting only weather-related variations, and no market power abuses are evident. The challenge now is to restructure ownership of the wires and retail suppliers to lower wheeling costs and avoid cross-subsidization. Since the Norwegian Energy Act came into effect in 1991, the electricity industry in Norway has operated as one of the most deregulated electricity industries in the world. The Energy Act introduced third party access to the retail market and competition in electricity production. The generation, sale and purchase of electricity is now highly competitive, with customers free to buy electricity from any generator, trader or the electricity Pool. Transmission pricing was separated from power purchasing arrangements, so that the buying and selling of electricity as a product is distinct from the transmission of electricity as a service. Transmission and distribution networks continue to maintain natural monopolies, with network owners providing wheeling service across their networks to customers who are connected to them. These monopoly sectors of the industry are subject to regulation by the government-appointed regulatory body, Norwegian Water Resources and Energy Administration (NVE). Regulation is on a cost-of-service basis, with the revenue allowance determined by NVE. The main force behind the Norwegian reform was the desire for efficiency gains to be achieved through a total restructure of the commercial character of the energy service industry (ESI). Unlike the U.K., in Norway the monopoly franchise for both generation and retail supply was removed in one step without any transition period, and the old pool was reformed to provide the needed structure for this new competitive energy market.
- OSTI ID:
- 457103
- Journal Information:
- Electricity Journal, Vol. 9, Issue 2; Other Information: PBD: Mar 1996
- Country of Publication:
- United States
- Language:
- English
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