Liberalisation Demands Regulatory Reform

Liberalisation of market entry is often mistaken for a complete absence of regulation. In some sectors, such as telecommunication and energy, the introduction of competition is accompanied by a reform of the regulatory framework as an essential component of modern infrastructure policy. Experience gained in the British electricity industry clearly points to the need for a comprehensive reform of the institutional framework of regulation. Against this background, translating individual elements of the regulatory model chosen for telecommunication in Austria to the energy sector appears to be a meaningful approach. Since the publication of the Delors White Paper (1994), the creation of a liberalised, European internal market has become a central concern of the European Commission also in the field of the infrastructural policy. In the telecommunication sector, the process of liberalising market entry was formally completed in all segments of the market as of 1 January 1998. Compared with telecommunication, the European Commission adopted a slower pace in opening up the energy market. However, through the adoption of Directive 96/92/EC concerning common rules for the internal market in electricity at the end of 1996 and Directive 98/30/EC concerning common rules for the internal market in natural gas in June 1998, a step-by-step schedule has now been set for the introduction of competitive energy services. The British example of electricity market liberalisation shows that the actual consequences of market opening are determined by numerous parameters, such as the structure of the existing stock of power plants, the type and number of market participants, and the development of supply in the markets for other sources of energy. At the same time, it illustrates the fact that even a largely independent regulatory authority, familiar with the specific features of the sector, faces difficult decisions and needs some time to learn how to use the new instruments of regulation. Unlike the establishment of a natural gas spot market, attempts made in the U.K. to establish a functioning electricity pool have so far been of only limited success. In Austria, the introduction of competition in infrastructure markets demands a corresponding reform of regulatory institutions. Measures to this end have already been taken in the Austrian telecommunication sector. The establishment of a governmental authority, which has demonstrated its ability to develop innovative and market-oriented regulatory instruments, such as auctions, is an essential component of the reform. In view of the regulatory decisions taken to date, it appears that adequate human and financial resources, a clear division of tasks between the authorities in charge of regulatory issues, and the independence of the sector regulator of vested interests and day-to-day government influence have been guaranteed.