Restructuring the Slovenian electricity industry - The benefits and costs of introducing the electricity market

In 1999, Slovenia adopted the Energy Law, which is set to significantly cha nge the way its electric utilities operate. Liberalization will take place in two stages. The first stage will run from April 15, 2001, to January 1, 2003, when eligible customers will be allowed to purchase electricity freel y at home. After 2003, the free purchasing rights will be extended to impor ts. The liberalization and introduction of the electricity market will requ ire a tremendous change in the operating philosophy of the entire Slovenian electricity sector. This article attempts to evaluate the effects of marke t opening for each stage separately. Emphasis is placed on the impacts of m arket opening on domestic prices for eligible and noneligible customers, on distribution effects as well as on allocative and production efficiency. T he magnitude of "stranded investments" in conjunction with options for thei r recovery are also addressed.