Finon, Dominique --- "Introducing Competition in the French Electricity Supply Industry: Erosion of the Public Hierarchy by the European Institutional Integration" [2003] ELECD 53; in Glachant, Jean-Michael; Finon, Dominique (eds), "Competition in European Electricity Markets" (Edward Elgar Publishing, 2003)

Book Title: Competition in European Electricity Markets

Editor(s): Glachant, Jean-Michael; Finon, Dominique

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843761785

Section: Chapter 11

Section Title: Introducing Competition in the French Electricity Supply Industry: Erosion of the Public Hierarchy by the European Institutional Integration

Author(s): Finon, Dominique

Number of pages: 28

Extract:

11. Introducing competition in the
French electricity supply industry:
erosion of the public hierarchy by
the European institutional
integration
Dominique Finon

INTRODUCTION

In February 2000 France, compelled by the 1996 European Directive 96/92,
undertook a minimal reform of the organization of its electricity industry,
while preserving the boundaries of the incumbent company.1 The reform
lays on the existing integrated structure a rule of third party access (TPA)
to the network, which allows bilateral direct sale arrangements on a limited
segment of eligible consumers, without any other notable changes of the
industrial structure. In keeping with its original position at the beginning
of the 1990s, the French government has not wished to undermine an
industrial organization that it considers to be economically and socially
efficient.
Is this structure, however, really all that stable? The theoretical model of
network industry liberalization considers that the introduction of limited
rules of competition into a previously integrated industry triggers a process
of destabilization, towards a deintegrated and stable form (Gilbert, Kahn
and Newberg, 1996). The change of rules provokes interest from potential
entry candidates demanding developments that limit the advantage to
the historical operator. In addition, it creates tension between competi-
tion-based logic and logic of the incumbent's dominant position. The dom-
inant position of the historical operator shows in a number of barriers to
entry: asymmetry of costs, manipulation of conditions of network access,
cross-subsidies between different segments of the market, various commer-
cial advantages (Armstrong, Cowan and Vickers, ...