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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)

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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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File URL: http://www.econ.kuleuven.ac.be/ew/academic/energmil/downloads/ETE-WP-2003-04.PDF
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Publisher 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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Web page: http://www.econ.kuleuven.be/ew/academic/energmil
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Related research
Keywords: electricity; congestion; network; monopoly;

Find related papers by JEL classification:
D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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This page was last updated on 2009-12-5.

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