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A critique of Wolak's evaluation of the NZ electricity market: Introduction and overview

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  • Lewis Evans
  • Seamus Hogan
  • Peter Jackson

Abstract

This paper is the first in a symposium of papers that examine the 2009 report by Frank Wolak into the New Zealand electricity market. The Wolak report concluded that there had been a cumulative total of NZ$4.3 billion of overcharging in the New Zealand wholesale market over a period of seven years. In this paper, we introduce the Wolak findings in the context of the salient features of the New Zealand market, and explain that this headline figure is highly sensitive to some (quite unrealistic) assumptions about the structure of this market. The two papers that follow this introduction examine Wolak's methodology and its empirical application.

Suggested Citation

  • Lewis Evans & Seamus Hogan & Peter Jackson, 2012. "A critique of Wolak's evaluation of the NZ electricity market: Introduction and overview," New Zealand Economic Papers, Taylor & Francis Journals, vol. 46(1), pages 1-10, November.
    • Handle: RePEc:taf:nzecpp:v:46:y:2012:i:1:p:1-10
    DOI: 10.1080/00779954.2011.645223
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    References listed on IDEAS

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    1. Lewis Evans & Greame Guthrie & Andrea Lu, 2010. "A New Zealand Electricity Market Model: Assessment of the Effect of Climate Change on Electricity Production and Consumption," Working Papers 10_09, Motu Economic and Public Policy Research.
    2. James B. Bushnell & Erin T. Mansur & Celeste Saravia, 2008. "Vertical Arrangements, Market Structure, and Competition: An Analysis of Restructured US Electricity Markets," American Economic Review, American Economic Association, vol. 98(1), pages 237-266, March.
    3. Evans, Lewis & Meade, Richard, 2009. "Alternating Currents or Counter-Revolution? Contemporary Electricity Reform in New Zealand, VUW Press 2005 , 1-346," Working Paper Series 4321, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    4. Baumol, William J & Bradford, David F, 1970. "Optimal Departures from Marginal Cost Pricing," American Economic Review, American Economic Association, vol. 60(3), pages 265-283, June.
    5. Lewis Evans & Graeme Guthrie, 2009. "How Options Provided by Storage Affect Electricity Prices," Southern Economic Journal, John Wiley & Sons, vol. 75(3), pages 681-702, January.
    6. Lewis Evans & Graeme Guthrie & Steen Videbeck, 2008. "Assessing The Integration Of Electricity Markets Using Principal Component Analysis: Network And Market Structure Effects," Contemporary Economic Policy, Western Economic Association International, vol. 26(1), pages 145-161, January.
    7. Lewis Evans & Greame Guthrie & Andrea Lu, 2010. "A New Zealand Electricity Market Model: Assessment of the Effect of Climate Change on Electricity Production and Consumption," Working Papers 10_09, Motu Economic and Public Policy Research.
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    Cited by:

    1. Oliver Browne & Stephen Poletti & David Young, 2012. "Simulating market power in the New Zealand electricity market," New Zealand Economic Papers, Taylor & Francis Journals, vol. 46(1), pages 35-50, December.
    2. Seamus Hogan & Peter Jackson, 2012. "A critique of Wolak's evaluation of the NZ electricity market: The incentive to exercise market power with elastic demand and transmission loss," New Zealand Economic Papers, Taylor & Francis Journals, vol. 46(1), pages 11-23, November.
    3. Evans, Lewis, 2013. "Competition policy development in New Zealand," Working Paper Series 4322, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.

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    More about this item

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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