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The effect of regulatory scrutiny: Asymmetric cost pass-through in power wholesale and its end

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  • Frieder Mokinski
  • Nikolas Wölfing

Abstract

We find an asymmetric pass-through of European emission allowance (EUA) prices to wholesale electricity prices in Germany and show that this asymmetry disappeared in response to a report on investigations by the competition authority. The asymmetric pricing pattern, however, was not detected at the time of the report, nor had it been part of the investigations. Our results therefore provide evidence for the deterring effect of regulatory monitoring on firms which exhibit non-competitive pricing behavior. We do not find any asymmetric pass-through of EUA prices in recent years. Several robustness checks support our results. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Frieder Mokinski & Nikolas Wölfing, 2014. "The effect of regulatory scrutiny: Asymmetric cost pass-through in power wholesale and its end," Journal of Regulatory Economics, Springer, vol. 45(2), pages 175-193, April.
    • Handle: RePEc:kap:regeco:v:45:y:2014:i:2:p:175-193
    DOI: 10.1007/s11149-013-9233-8
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    Cited by:

    1. Valadkhani, Abbas & Smyth, Russell, 2018. "Asymmetric responses in the timing, and magnitude, of changes in Australian monthly petrol prices to daily oil price changes," Energy Economics, Elsevier, vol. 69(C), pages 89-100.
    2. Brucal, Arlan & Tarui, Nori, 2021. "The effects of utility revenue decoupling on electricity prices," Energy Economics, Elsevier, vol. 101(C).
    3. Joltreau, Eugénie & Sommerfeld, Katrin, 2016. "Why does emissions trading under the EU ETS not affect firms' competitiveness? Empirical findings from the literature," ZEW Discussion Papers 16-062, ZEW - Leibniz Centre for European Economic Research.
    4. Castagneto-Gissey, Giorgio, 2014. "How competitive are EU electricity markets? An assessment of ETS Phase II," Energy Policy, Elsevier, vol. 73(C), pages 278-297.
    5. Anderson, Brilé & Bernauer, Thomas, 2016. "How much carbon offsetting and where? Implications of efficiency, effectiveness, and ethicality considerations for public opinion formation," Energy Policy, Elsevier, vol. 94(C), pages 387-395.
    6. Yin Chu & J. Scott Holladay & Jacob LaRiviere, 2017. "Opportunity Cost Pass-through from Fossil Fuel Market Prices to Procurement Costs of the U.S. Power Producers," Working Papers 2017-02, University of Tennessee, Department of Economics.
    7. Wang, M. & Zhou, P., 2017. "Does emission permit allocation affect CO2 cost pass-through? A theoretical analysis," Energy Economics, Elsevier, vol. 66(C), pages 140-146.
    8. Simeone, Christina E. & Lange, Ian & Gilbert, Ben, 2023. "Pass-through in residential retail electricity competition: Evidence from Pennsylvania," Utilities Policy, Elsevier, vol. 80(C).
    9. Germeshausen, Robert, 2018. "The European Union emissions trading scheme and fuel efficiency of fossil fuel power plants in Germany," ZEW Discussion Papers 18-007, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    Keywords

    Asymmetric price adjustment; Regulatory monitoring ; Wholesale electricity markets; Emissions trading; L4; L94; Q41; Q52;
    All these keywords.

    JEL classification:

    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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