During my trip to Finland last year I met a graduate student named Antti Silvast who is working on electricity and regulation, with many themes that intersect ours. A central concern in his work is how different norms — security, efficiency, social welfare — are being incorporated in regimes of regulation. Interestingly, the work also has a distinctive “federal” dimension, concerning the relationship between EU regulation and country-level regulation. Also interesting tie-ins with themes around reflexive modernization (although as Antti pointed out to me when I was in Finland, one has to be a little careful with such language in European debates, due to the reception of Beck). Antti has a good position for observation with direct contact with many of those on the Finnish side making policy and regulatory standards in this area. What follows is a short description he sent of his own work.

The Finnish Energy Market Authority (EMV) have released their new
guidelines on regulation of electricity distribution operators. The
regulation in Finland has thus far only concerned the prices and revenues
of electricity distribution operators. But now, EMV are introducing two new
aspects to regulation: from 2008, the regulation of technical and social
quality of electricity distribution and possibly from 2012, the regulation
of customer service of the electricity distribution operators.

Before commenting on this change, a short review of the reasoning behind
regulation is necessary. The electricity markets in Finland were
liberalised in Finland in 1995, whence electricity distribution and
electricity selling were separated as services. The Finnish energy market
law has arguments that resemble those from the EU’s directive concerning
internal market in electricity (2003/54/EC): liberalised models of
infrastructure provision should result in efficiency gains, price
reductions, higher standard of service and increased competitiveness
between electricity utilities. However, this does not mean full-blown
competitive markets. Rather, due to “shortcomings in the functioning of the
market” (2003/54/EC), e.g. possible discriminatory tariffs or market
dominance of distribution companies who still have regional monopoly, the
markets are regulated. This is to ensure “non-discrimination, effective
competition and efficient functioning of the market” (2003/54/EC, article
23).

The first wave of regulation took form of monitoring the prices and
revenues of electricity distribution operators. But this, as a report from
Council of European Energy Regulators notes [link: http://www.ceer-
eu.org/portal/page/portal/CEER_HOME/CEER_PUBLICATIONS/CEER_DOCUMENTS/2005/CE
ER_3RDBR-QOES_2005-12-06.PDF], poses the problem that the distribution
operators simply increase their revenues by lowering their expenses, e.g.
by reducing workforce. Thus, the second wave of regulation is taking more
technical and social viewpoint: regulating the actual and perceived quality
of electricity distribution and in the future, possibly also customer
service standards.

I am interested in the Luhmannian theory of macro-level differentiation of
society. From this perspective, regulation could introduce new codes to
communicate about electricity distribution. First wave of regulation
observed just markets. The second wave promises to observe markets and
technical quality, security, customer perceptions and welfare, perhaps even
ethics – the EU directive 2003/54/EC actually mentions “protection of the
rights of the vulnerable customers” as part of EU internal markets.
However, in the new regulation propositions in Finland all codes are
still “translated” to costs, prices and quantitative meters: e.g. the
perceived customers costs of electricity interruptions, the number of
interruptions for worst-served customers or the average times for answering
customer calls.

Luhmann has noted that calculation of costs has a warning function. It
renders the future present and reveals the negative aspects of actions:
once costs have been calculated, one acts only if the advantages appear to
outweigh the disadvantages. This is one way to mitigate future threats. But
as another trend of risk-consciousness, the electricity distributors and
security experts in Finland are taking interest in extremely improbable
occurrences like large-scale blackouts. One can well anticipate that at
some point, the quantitative approach of regulation will conflict with the
latter, very imaginative trend.