The restructuring of electricity industries abroad has prompted sharp increases in U.S. companies' private investment in foreign electricity assets, especially since 1994 (see figure). Much of this investment has gone into the restructured electricity industries in the United Kingdom (UK), where U.S. firms have acquired about half of all electricity assets, and in Australia. U.S. firms have also been the most prominent foreign investors in the recently privatized Argentine electricity industry, according to a new report from the Energy Information Administration, Electricity Reform Abroad and U.S. Investment.

In all three countries, restructuring was driven by the hope of achieving lower electricity costs for consumers and by the intent to raise funds to reduce public debt (and, in Argentina, to improve the electricity infrastructure). Further, all three countries created national electricity pools and enacted structural reforms of one kind or another before privatizing their electricity assets. Privatization was most extensive in the UK, which sold everything except its oldest nuclear power plants.

However, there were also significant differences. In Argentina and the UK, for example, the central government took the lead in restructuring. In Australia, it originated at both the state and national levels. While after privatization the UK generation market was initially dominated by two generation companies, five were created in Australia's Victoria province alone and more than three dozen were created in Argentina. In both the UK and Argentina, stranded costs associated with previous investments in nuclear power plants complicated the governments' attempts to privatize generation assets. Stranded costs were hardly an issue in Australia, which never developed commercial nuclear power.

Electricity Reform Abroad and U.S. Investment devotes a full chapter each to the electricity industry restructuring and privatization in the United Kingdom, Australia, and Argentina, and also briefly analyzes the characteristics of those U.S. utilities that have acquired assets abroad.

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Neal Davis, Office of Energy Markets and End Use

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