Electricity sector liberalization in the European Union: The political economy of regulatory reform

This dissertation looks into the reasons that pushed European countries to liberalize their electricity industries. The analysis of the political process leading to that decision in the areas pioneers of regulatory reform in this sector (United Kingdom, Sweden and the European Commission) shows that the liberalization of the European power sectors does not conform to the traditional theoretical explanations for regulatory reform that put interests and industry-specific considerations at the forefront of the explanation. The central argument of this dissertation is that, contrary to what most of the literature assumes and the theories predict, the primary impetus for the reforms in European electricity sectors did not come from industrial or economic worries, but rather from a neo-liberal turn to the ideas shared by European intellectual and political elites. The reform followed a political spill-over process by which the liberalization policy was emulated and introduced as a direct result of the international and sectoral diffusion of the new "efficiency regime" and the belief in the economic superiority of free markets over any form of government intervention.; As an idea-driven policy, liberalization was not always coherent with the stated goals and, with means and ends that were not always consistent with each other, the reforms were often hampered and their results ambiguous. Liberalization transformed energy policy priorities in member states by adding the promotion and development of market-based mechanisms to the previous two of ensuring that security of supply, was adequate and of achieving ambitious environmental targets. By adding economic efficiency (and its political corollary, low prices) to its policy goals, governments effectively rendered the realization of the other two goals all the more difficult. As a result, liberalization did not entail the expected government disengagement from the affairs of the industry. On the contrary, it became increasingly clear that governments would keep intervening in the market-place as competition forces alone could not bring the expected economic, technical and political benefits in a vital industry which continued to have particular technical and economic attributes as well as a strong capacity to influence other policy areas.