Good, BETTA, best? The role of industry structure in electricity reform in Scotland

This paper examines the effects of industry structure on the effectiveness of the restructuring process of the electricity industry in Scotland, with particular reference to the unbundling of electricity transmission. The analysis is carried out with respect to a set of goals designed to reflect Ofgem's statutory duties, namely: to promote competition (as a proxy of consumer interests), to signal the need for investments in generation, load and transmission expansion and to ensure efficient use of the network by licensees.The assessment of the 1990–2005 regulatory framework reveals major efficiency and competitive flaws and we argue that vertical integration of Scottish incumbents had a substantial role in determining this unsatisfactory performance. The paper discusses whether, and to what extent, the separation of transmission ownership and management under BETTA can be expected to deliver benefits to consumers with respect to the three goals assumed: we find that BETTA does in fact improve the performance of the restructuring process and we comment on the pros and cons of the separation between ownership and control of the grid brought about by BETTA. The final section examines the issues unaddressed, or only partially addressed, under the BETTA reform and argues in favour of a GB-wide Transco model.