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Anti-monopoly policy in electricity: Efficiency of capacity price auction and legitimate conduct of suppliers

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  • Vasilyev, M.

    (Melentiev Energy Systems Institute, Siberian Branch of the Russian Academy of Sciences, Irkutsk, Russia)

Abstract

There are requirements in Russian law to the behavior of suppliers. If some actions do not meet the requirements, the anti-monopoly authority will punish the supplier. There are different viewpoints on what behavior should be considered as well-founded. The paper considers approaches that aim to assess the behavior of power supplier from the viewpoint of a perfect competition market participant and from the viewpoint of cost recovery. The study indicates that different approaches to assess the behavior of capacity suppliers provide different results and supply curves. Capacity market in Russia requires bidding separately for each generating unit and it corresponds neither with the perfect competition model nor with dispositions of the Federal law "On competition protection", if the supplier operates more than one generating unit. Current requirements to conduct of capacity suppliers pose risk on them and do not correspond with efficient market from the viewpoint of industrial organization theory. It is suggested to change the bidding rules and conduct criteria - instead of unit-based bidding apply bidding by power plants and do not apply the criterion "monopolistically low price" to capacity supplier bids.

Suggested Citation

  • Vasilyev, M., 2019. "Anti-monopoly policy in electricity: Efficiency of capacity price auction and legitimate conduct of suppliers," Journal of the New Economic Association, New Economic Association, vol. 44(4), pages 190-207.
    • Handle: RePEc:nea:journl:y:2019:i:44:p:190-207
    DOI: 10.31737/2221-2264-2019-44-4-7
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    References listed on IDEAS

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    1. Ordover, Janusz A. & Saloner, Garth, 1989. "Predation, monopolization, and antitrust," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 9, pages 537-596, Elsevier.
    2. Cramton, Peter & Stoft, Steven, 2005. "A Capacity Market that Makes Sense," The Electricity Journal, Elsevier, vol. 18(7), pages 43-54.
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    Keywords

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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