Market power mitigation by regulating contract portfolio risk
AbstractAbuse of market power by dominant generation firms is a growing concern in worldwide electricity markets. This paper argues that relying only on general competition rules--as is the case in most European countries--is insufficient and that complementary ex-ante regulation is needed. In particular, regulators should incentivize firms to sign contracts with retailers by regulating their risk exposure. In a simulation model we show that this type of regulation can significantly reduce the deadweight loss in the market, without imposing large costs on regulatees.
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Bibliographic InfoArticle provided by Elsevier in its journal Energy Policy.
Volume (Year): 36 (2008)
Issue (Month): 10 (October)
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Web page: http://www.elsevier.com/locate/enpol
European electricity markets Market power mitigation Regulation of contracts;
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Center for Economic Studies - Discussion papers
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