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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Elsevier in its journal Energy Policy.
Volume (Year): 36 (2008)
Issue (Month): 10 (October)
Contact details of provider:
Web page: http://www.elsevier.com/locate/enpol
European electricity markets Market power mitigation Regulation of contracts;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bert Willems & Joris Morbee, 2008.
"Risk management in electricity markets: hedging and market incompleteness,"
Center for Economic Studies - Discussion papers
ces0823, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
- Willems, Bert & Morbee, J., 2008. "Risk Management in Electricity Markets: Hedging and Market Incompleteness," Discussion Paper 2008-031, Tilburg University, Tilburg Law and Economic Center.
- David M. Newbery, 1998.
"Competition, Contracts, and Entry in the Electricity Spot Market,"
RAND Journal of Economics,
The RAND Corporation, vol. 29(4), pages 726-749, Winter.
- Newbery, D. M., 1997. "Competition, Contracts and Entry in the Electricity Spot Market," Cambridge Working Papers in Economics 9707, Faculty of Economics, University of Cambridge.
- David Sappington, 1980. "Strategic Firm Behavior under a Dynamic Regulatory Adjustment Process," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 360-372, Spring.
- Mahenc, P. & Salanie, F., 2004. "Softening competition through forward trading," Journal of Economic Theory, Elsevier, vol. 116(2), pages 282-293, June.
- Allaz Blaise & Vila Jean-Luc, 1993. "Cournot Competition, Forward Markets and Efficiency," Journal of Economic Theory, Elsevier, vol. 59(1), pages 1-16, February.
- Jean-Michel Glachant & Adrien de Hauteclocque, 2009.
"Long-term Energy Supply Contracts in European Competition Policy: Fuzzy not Crazy,"
RSCAS Working Papers
2009/06, European University Institute.
- Hauteclocque, Adrien de & Glachant, Jean-Michel, 2009. "Long-term energy supply contracts in European competition policy: Fuzzy not crazy," Energy Policy, Elsevier, vol. 37(12), pages 5399-5407, December.
- Adrien de Hauteclocque & Jean-Michel Glachant, 2008. "Long-term Energy Supply Contracts in European Competition Policy: Fuzzy not Crazy," Working Papers 0816, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
- Jean-Michel Glachant & Adrien de Hauteclocque, 2009. "Long-term Energy Supply Contracts in European Competition Policy: Fuzzy not Crazy," EUI-RSCAS Working Papers 6, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
- Poletti, Steve, 2009. "Government procurement of peak capacity in the New Zealand electricity market," Energy Policy, Elsevier, vol. 37(9), pages 3409-3417, September.
- Adrien de Hauteclocque & Yannick Perez, 2011. "Law & Economics Perspectives on Electricity Regulation," RSCAS Working Papers 2011/21, European University Institute.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.