Revisiting Electricity Liberalization and Security of Supply: Empirical Evidence

What effect does firm structure have on the product service quality on offer? We answer this question by empirically assessing the impacts of complete vertical separation, such as ownership unbundling, on the quality of service delivered by a liberalized network industry. Electricity distribution utilities in New Zealand are considered for this purpose. The results show robust evidence that ownership unbundling contributed to a fall in the duration and frequency of supply interruptions in electricity distribution. However, the results also show that unbundling has no effect in reducing distribution network losses. Overall the results highlight the non-simple impacts of unbundling on quality of electricity distribution. We conclude that quality of service may improve when largely accounted in incentive regulation frameworks than completely relying on specific reform measures such as ownership unbundling.