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Wholesale Spot Price Pass-Through

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  • Littlechild, Stephen C

Abstract

It has been proposed that, when electricity markets open to retail competition, incumbent distribution utilities should be required to sell to residential customers at wholesale spot market prices. It is argued here that this overestimates the value of spot-price sales to customers, and underestimates the costs and disadvantages of the proposed policy. Experience in San Diego illustrates the problems. But other policies such as "shopping credits" have deficiencies too. An alternative approach, based on transitional maximum price caps, has facilitated the development of a competitive and fully deregulated residential retail market in the United Kingdom. Copyright 2003 by Kluwer Academic Publishers

Suggested Citation

  • Littlechild, Stephen C, 2003. "Wholesale Spot Price Pass-Through," Journal of Regulatory Economics, Springer, vol. 23(1), pages 61-91, January.
    • Handle: RePEc:kap:regeco:v:23:y:2003:i:1:p:61-91
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    Citations

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    Cited by:

    1. Nils-Henrik M. von der Fehr & Petter Vegard Hansen, 2010. "Electricity Retailing in Norway," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 25-46.
    2. Ahmad Faruqui, Sanem Sergici, and Lamine Akaba, 2014. "The Impact of Dynamic Pricing on Residential and Small Commercial and Industrial Usage: New Experimental Evidence from Connecticut," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    3. Paul L. Joskow, 2003. "The Difficult Transition to Competitive Electricity Markets in the U.S," Working Papers 0308, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
    4. Littlechild, Stephen, 2006. "Competition and contracts in the Nordic residential electricity markets," Utilities Policy, Elsevier, vol. 14(3), pages 135-147, September.
    5. Esplin, Ryan & Davis, Ben & Rai, Alan & Nelson, Tim, 2020. "The impacts of price regulation on price dispersion in Australia's retail electricity markets," Energy Policy, Elsevier, vol. 147(C).
    6. Neuhoff, Karsten & De Vries, Laurens, 2004. "Insufficient incentives for investment in electricity generations," Utilities Policy, Elsevier, vol. 12(4), pages 253-267, December.
    7. Littlechild, Stephen, 2006. "Residential energy contracts and the 28 day rule," Utilities Policy, Elsevier, vol. 14(1), pages 44-62, March.
    8. Littlechild Stephen C., 2002. "Competition in Retail Electricity Supply," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 12(2), pages 1-26, June.
    9. Stephen Littlechild, 2008. "Municipal aggregation and retail competition in the Ohio energy sector," Journal of Regulatory Economics, Springer, vol. 34(2), pages 164-194, October.
    10. Defeuilley, Christophe, 2009. "Retail competition in electricity markets," Energy Policy, Elsevier, vol. 37(2), pages 377-386, February.
    11. Stephen Littlechild, 2019. "Promoting competition and protecting customers? Regulation of the GB retail energy market 2008–2016," Journal of Regulatory Economics, Springer, vol. 55(2), pages 107-139, April.
    12. Almeida, Lucila de & Esposito, Fabrizio & van Zeben, Josephine, 2022. "When indicators fail electricity policies: Pitfalls of the EU's retail energy market Barrier Index," Energy Policy, Elsevier, vol. 165(C).
    13. Johnsen, Tor Arnt & Olsen, Ole Jess, 2011. "Regulated and unregulated Nordic retail prices," Energy Policy, Elsevier, vol. 39(6), pages 3337-3345, June.
    14. Galetovic, Alexander & Muñoz, Cristián M., 2011. "Regulated electricity retailing in Chile," Energy Policy, Elsevier, vol. 39(10), pages 6453-6465, October.
    15. Brown, David P. & Eckert, Andrew, 2018. "The effect of default rates on retail competition and pricing decisions of competitive retailers: The case of Alberta," Energy Policy, Elsevier, vol. 118(C), pages 298-311.
    16. Mirza, Faisal Mehmood & Bergland, Olvar, 2012. "Pass-through of wholesale price to the end user retail price in the Norwegian electricity market," Energy Economics, Elsevier, vol. 34(6), pages 2003-2012.
    17. Chien-Ping Chen, 2005. "Residential Consumer Switching and Electricity Restructuring Policy: The Pennsylvania Power Market," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 33(3), pages 311-323, September.

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