Electricity Reform - An Overview -

Nazar Hassan Mohammad

MSc sustainable electrical power

nazar.sherwani@gmail.com

OUTLINE

An introduction of electricity reform. Its

objectives and elements.

Word Bank and the key reform steps.

The players in an electricity market and their

roles.

Electricity market models.

Examples of electricity reforms.

Kurdistan – Electricity reform proposal

Electricity Reform

The electricity reforms took various approaches. They vary in degrees of deregulation and restructuring. It is important to note the distinction between deregulation and restructuring.

• Deregulation is a change in government control.

• Restructuring is reorganization of what is essentially a vertically integrated utility.

Electricity Reform

Objectives

• Efficiency increasing

• Costs reducing

• Quality of service improving

• Domestic and foreign investment attraction

• Broader array of choices to consumers

Electricity Reform

Elements The reform programmes adopted by countries have tended to include one or more of the following main elements:

• Break-up of vertically integrated utilities into specialized industries such as generation, transmission and distribution.

• Opening of municipal monopolies for competition.

• Development of a new regulatory framework. Establishment of “independent” or “quasi-independent” regulatory bodies instead of direct regulation by a government department.

Electricity Key Reform Steps (The Word Bank)

Incorporation / Commercialization

Restructuring

Legislation (Energy law)

Independent regulator established

Independent power producers (IPPs) introduced

Generation privatized

Distribution privatized

Players of Electricity market & their role

Those who operate the power grid(s)

• TSO – Transmission System Operator/ ISO – Independent System

Operator

The TSO/ISO operates the transmission assets and is responsible for the

power balance on the transmission system.

• Disco – Distribution Company / Distribution System Operator (DSO)

The DSO operates the distribution grid, and often additionally acts as a

retailer.

Players of Electricity market & their role

Those who sell and Buy • Genco - Generating Company

The Genco owns production assets (from single generator to a portfolio), whose generation is offered through the electricity market.

• Retailer

The Retailer buys electricity en gross from the wholesale electricity market, to then be sold to the end-consumers.

• Consumers (large and small)

Those eventually use the electricity for any purpose (from watching TV to heating to industrial production processes). There is a difference between small and large consumers, since the latter ones may be allowed to directly participate in the wholesale electricity market.

Players of Electricity market & their role

Those who rule and operate the “game” • The regulator

The regulator is responsible for the market design and its specific rules. It also monitors the market in order to spot misbehaviour in electricity markets (collusion, abuse of market power, etc.). Exs: CRE in France, Ofgem in the UK, etc.

• The market operator (MO)

The Market Operator organizes and operates the market place. This may include the definition of bid products and bid forms, set up and maintenance of the trading platform, daily matching of supply and demand offers, etc. Ex: Nord Pool, APX, EEX, PowerNext, etc.

Market model - Monopoly

Features: Two main participants: utilities and consumers Electricity prices is regulated by governments

Market model – Purchasing Agency

Features: The purchasing agency can be a pool or government entity. Electricity price is regulated by government.

Market model – Wholesale competition

Features: Wholesale (bulk) electricity market. Distribution companies and large consumers buy electricity from wholesale market. The transmission sector remains regulated to permit a competitive environment for

generation and retail services. Electricity price is regulated by government.

Market model – Retail competition

Features: Retailers or suppliers. Consumers can choose their suppliers. Electricity price is no longer directly regulated by government.

Summary of Restructuring activities in a Number of Countries

Turkey Electricity Reform

Jordan Electricity Reform

KURDISTAN – Electricity Reform Proposal (1)

KURDISTAN – Electricity Reform Proposal (2)

References

• Fundamentals of Power System Economics, Daniel Kirschen and Goran Strbac, 2004.

• International Restructuring and Privatization, T.K. Abdel-Galil, I. El-Amin and I.O. Habiballah.

• Electricity Market Reform – An International Perspective, Edited by: Fareidoon P. Sioshansi and Wolfgang Pfaffenberger, Elsevier, 2006.

• Privatization of Turkey’s Electric Distribution Industry.

Thank you

for your Kind attention