A Quantitative Analysis of Pricing Behavior in California's Wholesale Electricity Market During Summer 2000
AbstractWe simulate competitive benchmark wholesale prices for electricity in California during the summer of 2000, taking account of changes in natural gas prices, electricity demand, and imports of electricity from other states during this time period. We also examine the impact of changes in the prices of NOx emissions permits on estimated competitive benchmark prices for electricity. The competitive benchmark prices are then compared to actual prices. A significant fraction of the changes in wholesale electricity prices in California during Summer 2000 can be explained by these four factors. The impact of higher NOx permit prices, and their interaction with reduced imports into California, have a particularly large impact on competitive benchmark prices. However, during June, July and August a large unexplained difference between actual prices and competitive benchmark prices remains. We tentatively attribute this difference to supplier market power and related market imperfections. We then examine whether there is evidence of strategic behavior by suppliers during the highest priced hours during the summer. Evidence of supply withholding --- exercise of market power --- during these hours is identified.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8157.
Date of creation: Mar 2001
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Publication status: published as Joskow, Paul L. and Edward Kahn. "A Quantitative Analysis Of Pricing Behavior In California's Wholesale Electricity Market During Summer 2000," Energy Journal, 2002, v23(4), 1-36.
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Other versions of this item:
- Paul L. Joskow & Edward Kohn, 2002. "A Quantitative Analysis of Pricing Behavior in California's Wholesale Electricity Market During Summer 2000," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 1-35.
- Joskow, Paul L. & Kahn, Edward P., 2001. "A Quantitative Analysis of Pricing Behavior in California's Wholesale Electricity Market During Summer 2000," Working paper 506, Regulation2point0.
- Joskow, P. & Edward Kahn, 2002. "A Quantitative Analysis of Pricing Behavior In California’s Wholesale Electricity Market During Summer 2000," Cambridge Working Papers in Economics 0211, Faculty of Economics, University of Cambridge.
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
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