**Market-oriented power sector reforms began as experiments based on economic theory, taken up by political leaders.** Beginning in 1978, Chile was the first country to pursue comprehensive market reforms in its power sector (Bacon 1995). Chile fused different elements of existing arrangements in England, Belgium, and France (Pollitt 2004). But the ideological foundations can be traced to the US, in particular Milton Friedman and Friedrich Hayek at the University of Chicago. A generation of Chileans known as the “Chicago Boys” studied economics there from the 1950s. When Augusto Pinochet took rule of Chile in 1975, he empowered newly-appointed officials from this group to pursue a ‘revolutionary market society’, including in the power sector (Clark 2017). Friedman had already asserted the success of free-market ideas by the late 1960s, as a ‘counter-revolution’ to Keynesian economics.<sup>12</sup> The influence of these ideas reached new heights when UK Prime Minister Margaret Thatcher and US President Ronald Reagan took office in 1979 and 1981, respectively. Thatcher’s pursuit of economy-wide market reforms included enactment of full reform in the power sector by 1989, with a wholesale market of unprecedented complexity (Erdogdu 2014b). The US 1978 ‘Public Utilities Regulatory Policy Act’ allowed relatively efficient independent power producers (IPPs) to serve the grid and so conserve energy in response to the oil crises. Yet by facilitating competition with incumbent monopolies, the Act paved the way for subsequent broader ‘restructuring’ in line with the liberal economic agenda of Reagan and his successor, George H. W. Bush.

**By the 1990s, market-oriented reforms in the power sector had crystallized into a global norm, albeit with alternative formulations.** Early reformers’ market-oriented experiences involved a loose set of different ideas. The reform literature brought these together into what was subsequently called a “blueprint for action” (Bacon 1995: 124), a “standard model” (Littlechild 2001: 1), “standard prescription” (Hunt, 2002: 8), “textbook architecture” (Joskow 2008: 11), and Bhattacharyya’s (2011) ‘third phase’ of sector norms. However, this apparent commonality disguises many different ways to describe model market power sector reforms in detail. Table 1 summarizes how eight publications retrospectively define model reform elements and their objectives. The definitions of ESMAP (1999), Conway & Nicoletti (2006), and EBRD (2010) are normative. Others are descriptive studies of countries.

**Depending on the level of detail considered, model reforms may have seven or more elements.** These include: (1) legislation to institute subsequent elements; (2) establishment of an independent regulator; (3) separation or ‘unbundling’ of utilities, both ‘vertically’ (e.g. to separate generation from transmission and distribution) and ‘horizontally’ (e.g. to separate different generation companies or distribution service areas);<sup>13</sup> (4) corporatization and commercialization of utilities; (5) private sector participation through IPPs which may or may not be competitively selected, and through ownership of utilities; (6) market liberalization through open access to the grid for new providers, and through competition at wholesale and retail levels;<sup>14</sup> and (7) efficient pricing, which would result from competition, or in its absence, from

> 12 See Dostaler (1998) for analysis of how Keynes’ and Friedman’s theories are grounded in their respective political views. See Springer & others (2016: 3) for belief in markets as ideal institutions not only for economic efficiency but on moral and political grounds, and for critical discussion of the term ‘neoliberalism’ in associated literature.

> 13 It may also be structural (by divesting) or functional (by isolating business units within a company).

> 14 Markets can be for energy (i.e. power generated for a period of time), as well as capacity (i.e. potential to generate power on demand) and various other ‘ancillary services’. While energy markets receive more attention in the literature, other services―with or without markets―are critical for grid stability and security, especially in systems with high variability, such as where hydropower, solar photovoltaics, or wind constitute a significant a share of installed capacity.

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