From planning to strategy in the electricity industry

As more utility markets are deregulated and competition is introduced, there is an increasing need to understand how the planning methods used under monopoly have to change to take the new deregulated environment into account. Although this might seem relatively trivial, it has been a major problem for a large number of utilities which have continued using the same planning approaches that they used when they were monopolies. In this paper, we first describe the environment which, under monopoly conditions, gave rise to the use of mainly operational research methods for planning. We then argue that deregulation has changed the fundamental assumptions, making the planning methods used under monopoly less useful after deregulation. Finally, we review a number of methods that utilities should consider using when they formulate strategy in deregulated markets.