Economic Organization and Liberalization of the Electricity Industry

In this article a theoretical conceptualization of the liberalization of the electricity industry is developed. Three pure and six mixed coordination systems are identified. The main distinguishing factor is the choice of one of three different allocation systems (the price mechanism, voluntary agreement and governmental hierarchical authority) as a dominant or additional system. Based on this conceptualization, it is possible to operationalize the concept of liberalization, to distinguish it from the notions of privatization and regulation, and to model the relation between different sectoral organizations and different types of governmental regulation. The classification scheme is illustrated by applying it to four countries (the Netherlands, Germany, England and Wales, and France). The concept turns out to be useful in describing different organizational structures in the electricity industry, and in specifying the different degrees of liberalization already realized. Different national policy priorities are identified, and it is demonstrated that liberalization takes on very different meanings in different national settings. By taking account of these national approaches, future liberalization policies can be assessed.