Abstract:
The reform of the Electricity Supply Industry (ESI) in Australia is an
integral element of the wider economic reform agenda of the Australian
governments. Such reform, it is claimed, by its supporters, will improve the
productive efficiency of the electricity industry, result in lower prices for
electricity, and contribute to accelerate the overall growth of the economy.
This contention is based on the results of a set of empirical studies, conducted
by different research groups over the past decade, focusing on assessing
potential gains from ESI reform. The main methodological framework for
these studies essentially follows' a two-stage approach. The first stage
measures reform-induced gains in the productive efficiency of the ESI,
typically employing advanced analytical techniques such as the Index
Analysis (IA), Data Envelope Analysis (DEA), and Stochastic Frontier
Approach (SFA). These productivity gains are then - in the second stage - used
to assess macroeconomic impacts, generally in a Computable General
Equilibrium (CGE) framework. This paper provides an overview of these
studies and argues that this framework is inadequate for developing a realistic
appreciation for the wider impacts of ESI reform.
