This paper evaluates the developments in the Dutch electricity industry from the economic efficiency perspective from the late 1980s onwards. A reorganization of the sector laid down in the 1989 Electricity Act did not result in the expected efficiency gains. The changes proposed by the government in 1995 and 1996 aiming at reduction of existing inefficiencies are partially inspired by the negative experience but have their origin mainly in the expected liberalization of the EU electricity market, The paper argues that although the reforms prepared by the Dutch government remove part of the current inefficiencies, the benefits of the proposed structure are ambiguous: the ambition to gain a strong position on the European market would lead to a policy that conflicts with a competitive electricity market within the Netherlands as long as an international market has not been realized yet.