The long-run trend in the liberalized Dutch electricity market, in particular with respect to energy distribution by new entrants

The electricity industry in the Netherlands is currently facing a process of transition from a strongly regulated market to a more market-oriented regime. Until 2004 the Dutch electricity industry has been dominated by the public sector and has held a monopoly position. The Dutch government owned and operated electricity generating and distribution companies. All major allocation decisions, including pricing and investments, were made within a system of central national planning. In July 2004 the Dutch public authorities has decided to liberalise the entire Dutch electricity market and let the free market take the leading invisible hand. The decision to liberalise was based on one of the important requirements of the EU’s European Guidelines, with the objective to create a well-functioning competitive European electricity market that delivers on competitive electricity prices, on security of supply and ensuring investments, and on environmental objectives. The first step of the Dutch deregulation process was to enforce a legal split in the electricity entities, which entailed separation of generation, transmission, distribution and retail of electricity, into independent legal entities. As a result, the Dutch end-consumer of electricity now enjoys having the option to choose its own energy supplier for his/her household, independent of its location. After successfully satisfying the requirement of the EU for a legal split of the electricity market, the Dutch government decided to take further actions in the liberalization process. The Dutch Minister of Economic Affairs proposed to further split the Dutch electricity distribution, which is also referred to as an ownership unbundling or ownership split. An ownership split can be defined as the separation of firms' generation assets from their transmission networks. The government has set the proposal to ownership split in the electricity market to be implemented in January 2007. Although the ownership split of the electricity market has never been part of the official requirements of the European Guidelines. The Dutch Ministry of Economic Affairs claimed that the ownership split brings additional benefits and that therefore it is requisite for successful liberalization benefits.