THE ROLE OF MARKET STRUCTURE IN THE RESTRUCTURING OF ROMANIAN POWER SECTOR

Following the example of some other European countries and the EU Directives on Electricity, Romania is in the process of restructuring its electricity sector. The generation, transmission, and distribution sectors have been separated from each other, several regional distribution companies have been created, and the process of creating independent generation companies has begun. However, while one of the main goals of restructuring, in Romania and elsewhere, is to create competition among generation companies, in practice this has proved to be sometimes very difficult to achieve. One of the lessons of the EU experience with electricity sector restructuring is that the market structure has a crucial role for its future competitiveness. The structure of the mature EU power markets cannot be easily altered and its effects on market competition are hard to regulate ex-post. In Romania the process of restructuring is on going and the market structure is still amenable to government intervention. In this paper we examine the Rely competitive structure of the Romanian generation sector, as it resulted so far from the restructuring process. Our results suggest that although favorable initial conditions have been created, the future competitiveness of the sector hinges crucially on how the restructuring process will continue. In this context we discuss some recent proposals of "consolidating" the generation sector and point out that, if adopted, they are likely to significantly distort competition in the future.