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Electricity Liberalisation in Britain: the quest for a satisfactory wholesale market design

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Author Info
Newbery, D.

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Abstract

Britain was the exemplar of electricity market reform, demonstrating the importance of ownership unbundling and workable competition in generation and supply. Privatisation created de facto duopolies that supported increasing price-cost margins and induced excessive (English) entry. Concentration was ended by trading horizontal for vertical integration in subsequent mergers. Competition arrived just as the Pool was replaced by New Electricity Trading Arrangements (NETA) intended to address its claimed shortcomings. NETA cost over £700 million, and had ambiguous market impacts. Prices fell dramatically as a result of (pre-NETA) competition, generating companies withdrew plant, causing fears about security of supply and a subsequent widening of price-cost margins.

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File URL: http://www.econ.cam.ac.uk/electricity/publications/wp/ep64.pdf
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Publisher Info
Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0469.

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Length: 25
Date of creation: Nov 2004
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Handle: RePEc:cam:camdae:0469

Note: CMI, IO
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Web page: http://www.econ.cam.ac.uk/index.htm

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Related research
Keywords: electricity; liberalisation; market design; market power;

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Find related papers by JEL classification:
L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection

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References listed on IDEAS
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.:
  1. Roger E. Bohn & Michael C. Caramanis & Fred C. Schweppe, 1984. "Optimal Pricing in Electrical Networks over Space and Time," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 360-376, Autumn. [Downloadable!] (restricted)
  2. Newbery, D.M. & Pollitt, M.G., 1996. "The Restructuring and Privatisation of the CEGB: Was It Worth It?," Cambridge Working Papers in Economics 9607, Faculty of Economics, University of Cambridge.
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Cited by:
(explanations, 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.)

  1. Anette Boom & Stefan Buehler, 2007. "Restructuring Electricity Markets when Demand is Uncertain: Effects on Capacity Investments, Prices and Welfare," CIE Discussion Papers 2007-09, University of Copenhagen. Department of Economics. Centre for Industrial Economics. [Downloadable!]
  2. José A. García & James D. Reitzes, 2007. "International Perspectives on Electricity Market Monitoring and Market Power Mitigation," Review of Network Economics, Concept Economics, vol. 6(3), pages 397-424, September. [Downloadable!]
  3. Jamasb, T. & Pollitt, M., 2005. "Deregulation and R&D in Network Industries: The Case of the Electricity Industry," Cambridge Working Papers in Economics 0533, Faculty of Economics, University of Cambridge. [Downloadable!]
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