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Competition in the Electricity Industry in England and Wales

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  • Green, Richard
  • Newbery, David M

Abstract

When the electricity industry was privatized, the government made structural changes to encourage competition in generation and in supply to consumers. The conventional power stations were only divided between two companies, however, and we show that duopolistic competition in an unregulated spot market might imply undesirably high prices. Most sales are hedged in the contract market, which makes the spot market more competitive, and a realistic threat of entry could also force generators to keep their prices down. In the event, a large amount of entry took place, supported by the regional electricity companies' franchise monopoly over smaller consumers. That monopoly ends in 1998, so that further entry might become very difficult, while competition between firms already in the generation market is still limited. Vertical integration between the major generators and regional electricity companies might make entry even harder, and should be blocked until the industry is more competitive. Copyright 1997 by Oxford University Press.

Suggested Citation

  • Green, Richard & Newbery, David M, 1997. "Competition in the Electricity Industry in England and Wales," Oxford Review of Economic Policy, Oxford University Press, vol. 13(1), pages 27-46, Spring.
  • Handle: RePEc:oup:oxford:v:13:y:1997:i:1:p:27-46
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    Cited by:

    1. Hauteclocque, Adrien de & Glachant, Jean-Michel, 2009. "Long-term energy supply contracts in European competition policy: Fuzzy not crazy," Energy Policy, Elsevier, vol. 37(12), pages 5399-5407, December.
    2. Adrien de Hauteclocque & Yannick Perez, 2011. "Law & Economics Perspectives on Electricity Regulation," RSCAS Working Papers 2011/21, European University Institute.
    3. Ochoa, Patricia, 2007. "Policy changes in the Swiss electricity market: Analysis of likely market responses," Socio-Economic Planning Sciences, Elsevier, vol. 41(4), pages 336-349, December.
    4. Hernandez Martinez, Fernando, 2006. "La producción de energía eléctrica en España: Análisis económico de la actividad tras la liberalización del Sector Eléctrico
      [Electricity output in Spain: Economic analysis of the activity after li
      ," MPRA Paper 18050, University Library of Munich, Germany.
    5. Pittman, Russell, 2007. "Restructuring the Russian electricity sector: Re-creating California?," Energy Policy, Elsevier, vol. 35(3), pages 1872-1883, March.
    6. Adrien de Hauteclocque & Jean-Michel Glachant, 2011. "Long-term Contracts and Competition Policy in European Energy Markets," Chapters,in: Competition, Contracts and Electricity Markets, chapter 9 Edward Elgar Publishing.
    7. Waddams Price, Catherine & Bennett, Matthew, 1999. "New gas in old pipes: opening the UK residential gas market to competition," Utilities Policy, Elsevier, vol. 8(1), pages 1-15, March.
    8. Jean-Michel Glachant & Yannick Perez, 2011. "The Liberalization of Electricity Markets," Chapters,in: International Handbook of Network Industries, chapter 10 Edward Elgar Publishing.
    9. Danias, Nikolaos & Kim Swales, John & McGregor, Peter, 2013. "The Greek Electricity Market Reforms: Political and Regulatory Considerations," Energy Policy, Elsevier, vol. 62(C), pages 1040-1047.
    10. Arcos, Angel & de Toledo, Pablo Alvarez, 2009. "An analysis of the Spanish electrical utility industry: Economies of scale, technological progress and efficiency," Energy Economics, Elsevier, vol. 31(3), pages 473-481, May.

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