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Price discovery in restructured electricity markets

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  • Dempster, Gregory
  • Isaacs, Justin
  • Smith, Narin

Abstract

We empirically investigate the degree of integration that existed prior to the cost increases that caused emergency conditions in the Western Systems Coordinating Council (WSCC), particularly California, during the summer of 2000. Evidence from Granger causality tests and common features analysis over the period from December 1994 to September 1999 indicates a moderate degree of integration among these markets. However, price effects throughout the region were often only unidirectional, did not exhibit the characteristics of perfect substitutability, and were significantly influenced by institutional changes in the California market. Most importantly, our research suggests that these markets were not as highly integrated as earlier research had indicated.

Suggested Citation

  • Dempster, Gregory & Isaacs, Justin & Smith, Narin, 2008. "Price discovery in restructured electricity markets," Resource and Energy Economics, Elsevier, vol. 30(2), pages 250-259, May.
  • Handle: RePEc:eee:resene:v:30:y:2008:i:2:p:250-259
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    References listed on IDEAS

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    1. Borenstein, Severin & Bushnell, James, 1999. "An Empirical Analysis of the Potential for Market Power in California's Electricity Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 47(3), pages 285-323, September.
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    4. Oren, Shmuel S. & Spiller, Pablo T. & Varaiya, Pravin & Wu, Felix, 1995. "Nodal prices and transmission rights: A critical appraisal," The Electricity Journal, Elsevier, vol. 8(3), pages 24-35, April.
    5. De Vany, Arthur S. & Walls, W. David, 1999. "Cointegration analysis of spot electricity prices: insights on transmission efficiency in the western US," Energy Economics, Elsevier, vol. 21(5), pages 435-448, October.
    6. Walton, Steven & Tabors, Richard D., 1996. "Zonal transmission pricing: methodology and preliminary results from the WSCC," The Electricity Journal, Elsevier, vol. 9(9), pages 34-41, November.
    7. Barnett, Andy H. & Isaacs, Justin P. & Thompson, Henry, 2002. "Retail Electric Competition and Free Interstate Trade in the Southeast," The Electricity Journal, Elsevier, vol. 15(2), pages 68-74, March.
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    Cited by:

    1. Le Pen, Yannick & Sévi, Benoît, 2010. "Volatility transmission and volatility impulse response functions in European electricity forward markets," Energy Economics, Elsevier, vol. 32(4), pages 758-770, July.
    2. Katarzyna Maciejowska & Rafał Weron, 2015. "Forecasting of daily electricity prices with factor models: utilizing intra-day and inter-zone relationships," Computational Statistics, Springer, vol. 30(3), pages 805-819, September.
    3. Apergis, Nicholas & Fontini, Fulvio & Inchauspe, Julian, 2017. "Integration of regional electricity markets in Australia: A price convergence assessment," Energy Economics, Elsevier, vol. 62(C), pages 411-418.
    4. Rabindra Nepal and John Foster, 2016. "Testing for Market Integration in the Australian National Electricity Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    5. repec:dau:papers:123456789/5450 is not listed on IDEAS
    6. Vesterberg, Mattias, 2017. "Power to the people: Electricity demand and household behavior," Umeå Economic Studies 942, Umeå University, Department of Economics.

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