Power

Prior deregulation, most European countries had been operating the power industry through stateowned, (often monopolistic), vertically integrated companies or local municipal utilities. These companies owned all the power plants as well as the distribution and transmission grids.

This meant that the same company, that generated the power, transmitted and sold the power to the end consumers, in essence a highly inefficient and expensive market. 

Deregulation meant a redefining of the power industry into the four distinct sectors of distribution & transmission, generation, retail, and wholesale. With the exception of distribution & transmission, the other sectors would become markets open to competition. This meant that the "cost plus" practice of the monopolistic, vertically-integrated companies, which resulted in end consumers paying for all the inefficiencies in the supply chain, would no longer be possible.


Generators would now be able to offer their production into auctions for hourly periods of delivery carried out on a daily basis, with prices being set by the cheapest aggregation of production meeting the respective hour's demand. End consumers would now be able to buy their power requirements by choosing a supplier, who provided the most economic price, and between the generation and end consumer would be a wholesale market, fulfilling the traditional role of arbitraging out inefficiency and risk to achieve the most efficient allocation of resources.