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The impact of power market reforms on electricity price-cost margins and cross-subsidy levels: a cross country panel data analysis

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  • Erdogdu, Erkan

Abstract

One of the main expectations from power market reform has been a reduction in price-cost margins and cross-subsidy levels between industrial and residential consumers. This paper focuses on this issue by looking at the impact of the electricity industry reforms on residential and industrial electricity price-cost margins and their effect on cross-subsidy levels between consumer groups. Using panel data for 63 developed and developing countries covering the period 1982–2009, empirical models are developed and analyzed. The research findings suggest that there isn’t a uniform pattern for the impact of reform process as a whole on price-cost margins and cross-subsidy levels. Each individual reform step has different impact on price-cost margins and cross subsidy levels for each consumer and country group. Our findings imply that reform steps have different impacts in different countries, which supports the idea that reform prescription for a specific country cannot easily be transferred to another one. So, transferring the formal and economic structure of a successful power market in a developed country to developing countries is not a sufficient condition for good economic performance of the electricity industries in developing countries. Furthermore, the study suggests that power consumption, income level and country specific features constitute other important determinants of electricity price-cost margins and cross-subsidy levels.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 28414.

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Date of creation: 2011
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Handle: RePEc:pra:mprapa:28414

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Keywords: Models with Panel Data; Power Market Reform; Electricity Prices;

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Citations

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Cited by:
  1. Carlo Andrea Bollino & Davide Ciferri & Paolo Polinori, 2013. "Integration and convergence in European electricity markets," Quaderni del Dipartimento di Economia, Finanza e Statistica 114/2013, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
  2. Erdogdu, Erkan, 2011. "What happened to efficiency in electricity industries after reforms?," MPRA Paper 32483, University Library of Munich, Germany.
  3. Kalantzis, Fotis & Sakellaris, Kostis, 2012. "Investigating the Impact of the Greek Electricity Market Reforms on its Day-Ahead Market Prices," MPRA Paper 37794, University Library of Munich, Germany.
  4. Rabindra Nepal & Tooraj Jamasb & Clement Allan Tisdell, 2013. "Market-Related Reforms and Increased Energy Efficiency in Transition Countries: Empirical Evidence," Energy Economics and Management Group Working Papers 8-2013, School of Economics, University of Queensland, Australia.
  5. Erdogdu, Erkan, 2011. "Determinants of successful electricity market reform," MPRA Paper 38410, University Library of Munich, Germany.
  6. Schober, Dominik, 2013. "Static vs. dynamic impacts of unbundling: Electricity markets in South America," ZEW Discussion Papers 13-033, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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