Collaborative Governance: Lessons for Europe from U.S. Electricity Restructuring

Abstract

Nothing in any modern society is more important than an adequate supply of electricity. Market design may be as important as physical choices in assuring efficient, fair and environmentally sensitive distribution of this increasingly scarce resource. Both the European Union (EU) and the United States (US) have been engaging in restructuring their electricity industries in order to improve market designs. The EU is considering a new group of proposals put forth after extensive study by the EU Commission, known as the "third package." This article contrasts the path chosen in this and previous legislative projects with the direction taken in the US. The EU Commission proposals depend on command and control regulation to monitor the inevitable discriminatory and anti-competitive elements in this industry. The US may have found a better way. The US industry, with the encouragement of federal regulatory authorities, has shifted to a model know in US administrative law as "collaborative governance." Collaborative governance relies on joint public/private problem solving; it concentrates on broad participation, inclusion of all the stakeholders, and transparency to assure public regarding performance. This article examines the problems identified by the EU Commission in terms of the US collaborative governance approach. Its goal is to generate a transatlantic dialogue, a dialogue that might prove useful to energy policymakers throughout the world.

Keywords: electricity, regulation, administrative law, European Union

JEL Classification: H11, K23, L50, L94