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Should an incumbent generator be allowed to buy import transmission capacity?

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Author Info

  • Bert Willems

    ()
    (K.U.Leuven, C.E.S., Energy, Transport and Environment)

Abstract

A small region has a high cost monopolistic electricity generator. It is connected through a low capacity transmission line with a large, competitive low cost region. Access to the transmission line is auctioned. I show that, if consumers arbitrate on the regional price differences, the monopolist will buy the transmission capacity. It is then welfare improving not to allow the monopolist to buy transmission rights. In theory, if consumers could co-ordinate and overcome free-riding, then they would bid more than the monopolist.

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Bibliographic Info

Paper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment in its series Energy, Transport and Environment Working Papers Series with number ete0304.

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Length: 7 pages
Date of creation: Feb 2003
Date of revision:
Handle: RePEc:ete:etewps:ete0304

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Keywords: electricity; congestion; network; monopoly;

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