Unbundling of operation and network development activities in electricity distribution

Abstract

Purpose

Based on literature and an empirical case, the purpose of this paper is to present a framework for decision‐making in utilities where unbundling considerations are taking place. The paper analyses the implications of splitting long‐term network planning activity from the organization responsible for short‐term network operation activities.

Design/methodology/approach

The proposed framework includes an analysis of impacts of external forces, set‐up of common targets and performance models, and alignment of responsibilities in the new organization. The empirical results and validation of the proposed framework is performed by an electric utility, where legal unbundling of activities has taken place; the study includes expert interviews and theoretical analysis.

Findings

Colliding interests in the new business model can be avoided if economic and technical targets are mainly set by the regulator for both network development and operation activities.

Research limitations/implications

The results are based on internal re‐organization; a complementary study on re‐organizing network business activities to an external service provider could give information about the generalizability of the findings.

Practical implications

Application of the proposed framework for decision‐making and lessons learned can support electric utilities when planning for unbundling and strategic target‐setting in the unbundled business model.

Originality/value

The study presents experiences of re‐organized network business activities in a pioneering market area with a long experience of outsourcing. The detailed analysis of internal re‐organization within one electric utility can facilitate further restructuring phases.

Citation

Lassila, J., Tanskanen, A., Lohjala, J. and Partanen, J. (2009), "Unbundling of operation and network development activities in electricity distribution", International Journal of Energy Sector Management, Vol. 3 No. 4, pp. 383-405. https://doi.org/10.1108/17506220911005759