Governance transformations through regulations in the electricity sector: the Dutch case

Abstract

The liberalization and re‐regulation of the European electricity industries have been driven by the European Commission’s attempt to create one internal competitive electricity market. The European electricity directives require the vertical separation of the European electricity firms to enable the introduction of market forms of governance. Transaction cost economics argues for the efficiency of vertical integration in this industry on the basis of the attributes of the transactions that are characterized by a great degree of asset‐specificity and uncertainty. This paper poses the questions whether regulation has led to the prospected outcome of governance transformations to the market and whether and how the attributes of transactions adapt to the altered forms of governance. We answer these questions by analyzing the empirics of the Dutch electricity industry. We found that the market forms of governance did not emerge, the attributes of the transactions are relatively inert and that regulation at most has led to second‐best governance solutions.

Keywords:

• regulation
• transaction cost economics
• liberalization
• electricity industries

JEL classification:

• B52
• L14
• L22
• L5
• L94