Description

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The electric power industry has undergone rapid and irreversible changes since 1980s. Traditionally, large utilities have total control in a vertically integrated system. These utilities control production, transmission, and distribution in a region. According to the rules of the monopoly market, a single utility can produce, transmit and distribute electricity in an area. Utilities have to operate in accordance with government plans, rules, and regulations. At the same time, they had to be assured of reasonable returns. In most parts of the world, this has led to inefficiency and sluggish attitudes in the industry. They focused more on profit rather than technological innovation and customer satisfaction. These monopolistic strategies were necessary for the expansion, standardization, and development of power industries. The power sector was restructured in many countries to operate under the control of state and federal governments with the main objective of increasing the production and distribution of electricity. Several countries such as Chile, Great Britain, Spain, Argentina, New Zealand, Norway, Sweden, and USA have undergone restructuring to encourage privatization of the power sector, more choices to the consumers and competition among producers. The purpose of the power industry restructuring is to eliminate monopoly in the production and trading sectors, thereby, introducing competition at various levels wherever possible. Generating companies may have contracts for the supply of generated power to electricity dealers/distributors or wholesale consumers. They can also sell electricity in a pool in which electricity producers and customers also participate. Thus, electricity trading will be freed from traditional rules and become competitive. The restructuring of the existing rules and regulations to provide a competitive electricity market is known as deregulation.