IPIC SUMMARY Session 12

1
IPIC SUMMARY Session 12
Group 3 Eric Heurtaux Vanessa Bertelli Tom
Farrell Inge-Lise Peetz Kapil Sharma
October 1st, 2003
2
INDUSTRY STRUCTURE DRIVES NEED FOR REGULATION
Competitive industries

• Structural competition
• Monopoly abuses are difficult

• Potential for abuse of dominant position
• Need for regulatory actions deregulation,
  level playing field, anti-trust law...

Oligopolistic industries
Natural monopoly

• Higher efficiency when operated by only one
  company
• Need to monitor natural monopoly

3
CASE STUDYTHE ENERGY INDUSTRY
Supply
Generation
Transmission / Distribution

• Low barrier to entry
• Commodity
• Competitive industry

• High capital intensity
• Large economies of scale
• Natural monopoly

• Synergies with other utilities
• Competitive industry

In France, competition in the generation and
supply sector has not yet been completely achieved
4
CASE STUDYPOSITION OF STAKEHOLDERS IN FRANCE

• European Commission clearly pushes for more
  competition in supply and generation in order to
• Provide level playing field
• Limit excess capacity
• French public opinion is rather reluctant due to
• Strength of unions defending EDF employees jobs
  and benefits
• Real attachment to the concept of public services
• Apparent efficiency of EDF from consumers
  perspective
• EDF is indifferent towards deregulation and wants
  privatization due to
• Not being scared of competition (low price of
  electricity in France and production efficiency)
• Current difficulties it faces in acquiring
  companies abroad
• Having received no government subsidy during the
  last 20 years

5
SUPER SUMMARIZED SUMMARY

• There are two types of monopolies
• Natural monopolies which maximize societal
  benefits that should be monitored but should not
  lead to deregulation
• Market failure monopolies which decrease societal
  benefits that should lead to deregulation
• Before any regulation/deregulation, it is key to
  analyze the industry structure
• However, even when deregulation leads to more
  efficiency, it is sometimes hard to implement due
  to stakeholders diverging opinions
• In the EDF case, the French government has not
  completely deregulated the electricity market
  fearing strong public opinions opposition