This paper deals with the efficiency characteristics of alternative governance structures in the electricity sector. The analysis begins with the description of some technical aspects of the electricity supply industry. The goal is to identify the main co-ordination tasks within, and between the different production stages. The paper goes on to present the analytical framework for the following analysis, which is based on the New Institutional Economics. The central part of the paper deals with the institutional implications of the technical characteristics, particularly regarding the private incentives to establish efflcient governance structures in the electricity sector. Furthermore, the welfare implications of the resulting governance structures are analysed. The paper concludes with a summary of the main results.