Dutch Utility "Demerger" Law Violates EU Law

In July 2007, the Dutch enacted an unbundling law to require all integrated utilities companies to separate their operations into two distinct groups: one that handles transmission (grid management) and another for generation and operations. This law is not unlike the Federal Energy Regulatory Commission's Order 888, issued in 1996, which required utilities to separate generation and marketing functions, allow open access to transmission lines, and provided for the recovery of stranded costs. The Hague Court of Appeal just determined that the Dutch law violated EU law. (H/T: Baker McKenzie)

Industry regulation may have value, and (in my opinion) separating generation and transmission functions is worthwhile, but it is rarely as easy it may seem. Especially in infrastructure intensive industries, the transition is extremely complex. The market system that one might choose if starting from scratch is rarely one that can be easily implemented fifty or one hundred years into the process. Just ask anyone who worked in the stranded cost issues related to the unbundling process in the United States.

--Josh Fershee