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Article Excerpt
The 1990s delivered a decade of structural change, with astonishing rapidity, to electricity sectors around the world (Bacon and Besant-Jones 2001). Australia has been at the forefront with its electricity restructuring being hailed by an Organisation for Economic Cooperation and Development (OECD) agency as a role model against which other countries should benchmark their own progress (International Energy Agency (IEA) 2005).
The structure and operations of today's Australian electricity sector bears little resemblance to that of a decade ago. Former government monopolies have been broken into multiple companies and funds from those sold have made a significant contribution to one of the world's largest privatization programs. Offshore transnational corporations (TNCs) dominate private ownership although it remains a government-dominated sector. A national electricity market (NEM) has been created, which also was pivotal to a nearly decade-long program promoting national competition and the basis for billions of dollars paid to State and Territory governments. Most consumers can now choose their electricity supplier and the number of wholesale buyers and sellers has risen exponentially.
Discourse about this sector's restructuring has been consistently framed within a context of regulatory change and the NEM being the driving forces (for example, Abbot 2002; Bardak Ventures 2005; Beder 2003; Booth 2003; COAG Energy Market Review 2002; Fairbrother and MacDonald, 2000; Quiggin 2002; Tagaza 1998; Willett 2005). This, I contend, produces an incomplete--and hence, inaccurate--conceptualization of the sector's transformation that is narrowly based around sector-specific changes. The Australian electricity sector's transformation has been shaped not only by these electricity-centric elements but also by the shift to workplace bargaining over wages and working conditions, the rapid growth of financial markets and new money forms, Australia's increasing global integration and a range of public sector policies including corporatization, market provision of infrastructure and privatization. The electricity sector's structure and operation, and the outcomes of the restructuring, can only be explained by considering all these drivers of change, introduced over more than a decade by the Australian state and all embodying the precepts of neoliberalism.
This can be shown using the analytical framework of the French theory of regulation, a theory of structural change that has the capacity to explain change emanating from multiple factors over a period of time, and to show a wide range of outcomes, as well as the stakeholder interests impacted. Regulation theory explains actual (not hypothesized) change--concreteness--by analysing the mode of regulation that secures accumulation, the process by which capitalism is reproduced and expanded over time.
Five institutional (or structural) forms comprise the mode of regulation, the dimensions of which are not limited to economic or quantitative factors and are defined by: wage-labor's relationship with capital, monetary and credit relationships, competitive relations between firms, international relationships and arrangements, and the form of state interventions including economic policy (Boyer 1990; Dunford 1990; Boyer and Saillard 2002). The five institutional forms, individually and their conjunction, provide a powerful analytical framework because an extensive range of factors is considered. This means that change outcomes are not limited in type (for example, to output, investment or employment) and a far more holistic picture of the change process is provided.
This analytical framework is also able to explain change at a meso or sector level by analyzing each of the five macro institutional forms before proceeding to determine the impact of each at the sector level and if there is any reflection of the macro forms through unique sector institutional arrangements to delineate a sector mode of regulation. This means that macro parameters or concepts are not used to explain sectoral change. This approach also means that the sector's mode of regulation and sectoral change can only be understood by reference to the macro. Neither the sectoral mode nor sectoral change can be understood purely through analysis of a five-dimensional grid (du Tertre 2002; Moulaert and Swyngedouw 1992).
Using this analytical framework, the paper examines the influences driving change through the Australian electricity sector as well as the outcomes and beneficiaries of that change process. Following a broad overview of the restructuring, the change drivers and outcomes for the electricity sector are discussed within the context of the five institutional forms comprising the Australian mode of regulation, that is, international position, monetary regime, competition, the wage-labor nexus, and the form of the state. The key winners and losers are delineated followed by a brief discussion of the implications for electricity sector restructuring around the world.
What Restructuring?
Almost all of the world's electricity, throughout the last century, was produced and supplied by vertically integrated monopolies, the majority of which were government-owned. Traditionally, all functions to produce and supply electricity had been performed by one company (that is, vertically integrated) because "electricity was considered a textbook natural monopoly" (Dubash 2002, 11). (1) By the late 1980s, this conventional wisdom was being strongly challenged by a new paradigm that asserted the need for greater competition and less government involvement, and technological change was challenging the natural monopoly assumption for electricity generation with the advent of smaller, less capital-intensive combined cycle gas plants. Benefits were claimed to include lower prices for all consumers, more efficient operations through lower costs, the elimination of cross-subsidies, and far more productive investment (Crow 2001; Joskow 2003; Newbery 2002).
The application of this paradigm of competition and increased private sector involvement has had a pervasive impact on the global restructuring of electricity sectors, being most readily apparent through three dimensions. First, vertically integrated companies have been unbundled. The perceived competitive activities of generation and retail have been separated from transmission and distribution, which are still regarded as natural monopoly activities. In addition, generation and retail have been horizontally de-integrated by being further divided into competing businesses. Secondly, the management practices and organizational forms of government-owned electricity companies have changed significantly. These companies have been commercialized (operations on the basis of commercial principles), then corporatized (replication of private sector operations but still subject to regulatory oversight) and ultimately, although not in all cases, privatized. The third dimension to change has been the sector's regulatory regime. New forms of regulation and institutions have been created to operate wholesale and retail markets, oversight access to transmission and distribution networks, determine the pricing of monopoly activities, monitor the performance of electricity companies, and represent consumer interests.
No one standard set of sector-specific changes has been adopted. Glachant observed, in relation to European electricity restructuring, "there is no convergence towards a single model and a significant diversity persists" (2004, 154). The same conclusion is equally pertinent to the global span of electricity sectors although some trends are discernible. Horizontal and vertical de-integration, the re-integration of generation capacity with retail businesses, increasing market concentration, public and private ownership, energy TNCs becoming major players often through privatization programs, the majority of electricity traded through bilateral contracts, voluntary wholesale markets used to balance demand and supply, distribution and transmission regulated as monopoly activities, and the creation of new regulatory regimes, all define the general dimensions and structural characteristics of contemporary electricity sectors around the world (Glachant and Finon 2003; Kessides 2004; Newbery 2002; Pollitt 1997).
This pattern of structural characteristics has also strongly emerged in the Australian electricity sector (Beder 2003; Booth 2003; Tagaza 1998). The two State governments of Victoria and South Australia privatized their electricity assets, the Australian Capital Territory sold 50% of its distribution-retail business and the Queensland government recently sold its two retail businesses. Vertical and horizontal de-integration has occurred with the 34 government-owned electricity companies existing in 1990, spawning 57 companies by mid-1995--following consolidation and mergers, this number fell to 43 by late 2006, although more than half are now privately owned. In late 1998, the mandatory NEM commenced to trade the vast majority of electricity generated and consumed. (2) A complex regulatory regime, including three new federal bodies, has been implemented to manage the day-to-day operation of the NEM as well as the regulation of transmission and distribution. Each State and Territory has progressively introduced retail competition although all have maintained a retail price cap for residential consumers. The sector-specific changes to Australian electricity's structural characteristics are very consistent with those introduced around the world with one exception. Australia is the only country to introduce and maintain a mandatory wholesale trading market.
The transformation of electricity sectors has occurred as part of a far-reaching restructuring of the economic, social and political conditions for capital accumulation around the world following the global recession of the 1970s. This restructuring has been driven by the ideology of neoliberalism's metamorphosis into the "central guiding principle of economic thought and management" (Harvey 2005, 2) and the emphatic worldwide turn toward neoliberalism. Neoliberalism rests on a belief in markets and individual responsibility as well as social conservatism. Human well-being is considered to be best achieved through private property rights, free markets and free trade, and the role of the state is to create an institutional framework that promotes such practices. The political ascendancy and hegemony of neoliberalism has seen significant changes to the role of the state moving away from a strong interventionist Keynesian welfare-state role to one of less active intervention as...
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