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New Zealand is the only country to date to have implemented forced ownership unbundling of electricity distribution from the rest of the electricity supply industry (in 1998). This paper examines the impact of this policy on electricity prices, quality of service and costs. We find that ownership unbundling did not achieve its objectives of facilitating greater competition in the electricity supply industry but that it did lead to lower costs and higher quality of service. We suggest that this experience indicates the potential benefits of ownership unbundling in Europe but also the danger of unintended consequences.

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The cost-effectiveness of plastic recycling is compared to energy recovery from plastic incineration in a waste-to-energy plant using data for the Netherlands. Both options have specific benefits and costs. The benefits of recycling are the avoidance of both CO2 that otherwise would be emitted during incineration and the production of virgin (new) material. There are significant costs, such as collection costs and recycling costs involved for plastic recycling by municipalities. The benefits of energy recovery from plastic are heat and electricity production leading to fewer emissions in the regular energy production sector, but this requires a waste-to-energy plant with the associated capital investments. Summing all the costs and benefits results in an implicit CO2 abatement price of 172 Euro per tonne of CO2 in case of plastic recycling. In general, this implicit price is much higher than current (or historic) ETS prices, the estimated external costs of CO2 emissions, or alternatives to reduce CO2 emissions (e.g. renewable energy). A sensitivity analysis shows that this conclusion is robust.

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Consolidation in many sectors has lead to the formation of “groups of companies”. Extracting all the potential cost savings from these independent or separate operating units is a challenge given asymmetric information. We develop a step-by-step approach that applies regulatory benchmarking techniques to set efficiency targets for operating units. Holding company management – like a regulator – will want to set targets to encourage efficient operation but in the absence of full information on effort, costs and environmental conditions. Our approach using the parallel with regulation incorporates issues such as measurement error and potential environmental factors that could influence the underlying efficiency score. We demonstrate the approach using data from the US electricity distribution sector and show that substantial savings can be extracted using this approach that was originally developed for regulatory purposes.

The outcome of the first electricity distribution price control review in The Netherlands did not deliver the savings initially suggested by the regulator (DTe). During the course of the first 3-year regulatory period, DTe revised the X-Factors four times. The impact on tariffs has been substantial. DTe initially announced in 2000 that savings would be equivalent to 25% of electric distribution revenues (e2bn). However, final X-Factors in May 2003 resulted in savings of 10% of revenues. The total cost to consumers-when compared to the most probable outcome-has been e140 mln (7% of total revenues).

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