Electricity Industry Reform in Australia: Rationale, Impacts, Challenges

Abstract

The Australian electricity industry has undergone significant reform in the past decade. The industry has been functionally unbundled into competitive and monopoly segments, several segments of the industry have been privatised and new regulatory arrangements have been developed. The outcome of this reform has been mixed. Overall, there appears to be a gap between expectations from reform and its actual outcomes. The discussion about the reasons behind this gap and how to narrow it, and indeed every aspect of reform (e.g., its rationale, ‘model’ of reform, methodologies for assessing impact of reform) has been carried out exclusively in the economic domain. This research has demonstrated that this (economic only) approach is rather limited. It has contributed to painting a rather positive picture of reform and has resulted in the adoption of policy measures that are unlikely to provide satisfactory redress for the challenges faced by the electricity industry. Such redress, this thesis has argued, could instead be provided by taking an institutional perspective on reform. This perspective views electricity reform as an institutional phenomenon, shaped by ever-changing cultural, social, and political belief systems. These belief systems, this research has shown, emerge from the interaction between humans, organisations, and institutions. The dynamics of this interaction has been analysed in this research in a problem-solving framework that employs a political economy approach. It was shown how humans, guided by motivation and cognition, created various electricity organisations that, through a chain of two-stage process of ‘tentative-solution-and-error-elimination’ (or ‘trial-and-error’), set into motion an organisational learning process that determined the final contours of the Australian electricity reform. This research also suggested how political economy approach could be effectively employed to re-define future directions for the Australian electricity reform program.