On February 19, 1999, competition will officially come to Europe's electricity markets. European Union directives stipulate that large industrial consumers will then have the right to choose their electricity suppliers—a decision that effectively opens up a quarter of the EU electricity market. At the same time, new players will be allowed to submit tenders for building power stations and supplying customers with power directly over incumbents' transmission networks.1
A range of regulatory and technological factors will make liberalization proceed at different rates in different places.2 Nonetheless, the bottom line is that Europe's utilities face increasing competition. Continental utilities, which will find their markets radically transformed, must decide how to respond. Their counterparts in the United Kingdom and Scandinavia, which are already accustomed to competition, must seek out new opportunities.
For Continental Europeans, the most important fact is simply that the old, vertically integrated model of electricity production has been undermined in the long term. Complex reasons having to do with historic regulations, attitudes about national identity, and the risk of market failure made each country develop large national or regional utilities that owned every part of the process of producing and distributing electricity. Political and technological changes...