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The Competitive Role of the Transmisión System in Price-regulated Power Industries

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Author Info
M. Soledad Arellano
Pablo Serra ()

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Abstract

This note shows how the transmission system can enhance competition in price-regulated power industries, thus extending earlier findings reported in the literature for deregulated industries. In the context of a two-technology, price-regulated power industry, we show that the interconnection of two markets initially supplied by a different monopoly reduces market power and raises welfare. We also show that the capacity of the transmission line plays a key role in determining whether market equilibrium lies closer to competition or monopoly.

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Paper provided by Centro de Economía Aplicada, Universidad de Chile in its series Documentos de Trabajo with number 214.

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Date of creation: 2005
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Handle: RePEc:edj:ceauch:214

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  1. Hogendorn, Christiaan, 2003. "Collusive Long-Run Investments under Transmission Price-Caps," Journal of Regulatory Economics, Springer, vol. 24(3), pages 271-91, November. [Downloadable!] (restricted)
  2. Severin Borenstein & James. Bushnell & Steven Stoft, 2000. "The Competitive Effects of Transmission Capacity in A Deregulated Electricity Industry," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 294-325, Summer.
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  3. M. Soledad Arellano & Pablo Serra, 2005. "Market Power in Price-Regulated Power Industries," Documentos de Trabajo 208, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
  4. Hogan, William W, 1992. "Contract Networks for Electric Power Transmission," Journal of Regulatory Economics, Springer, vol. 4(3), pages 211-42, September.
  5. Leautier, Thomas-Olivier, 2001. "Transmission Constraints and Imperfect Markets for Power," Journal of Regulatory Economics, Springer, vol. 19(1), pages 27-54, January. [Downloadable!] (restricted)
  6. Crew, Michael A & Fernando, Chitru S & Kleindorfer, Paul R, 1995. "The Theory of Peak-Load Pricing: A Survey," Journal of Regulatory Economics, Springer, vol. 8(3), pages 215-48, November.
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