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Electricity Merger Policy in the Shadow of Regulation

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  • Gilbert, Richard J
  • Newberry, David M

Abstract

Electricity mergers pose distinctive challenges for competition policy - in market definition and for modelling price impacts in markets with no storage, inelastic short-run demand and transmission constraints. FERC’s pivotal supply test for screening mergers is an improvement on market shares, but still potentially misleading. We counter-propose competitive residual demand analysis. The EU is poorly placed to deal with domestic mergers that impact external energy flows. The paper argues that vertical (convergent) mergers between electricity and gas raise additional concerns, given current EU gas market power, exemplified by the E.On-Ruhrgas merger. The form of the Emissions Trading System amplifies these concerns.

Suggested Citation

  • Gilbert, Richard J & Newberry, David M, 2006. "Electricity Merger Policy in the Shadow of Regulation," Department of Economics, Working Paper Series qt7bh5f7rn, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    • Handle: RePEc:cdl:econwp:qt7bh5f7rn
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    References listed on IDEAS

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    1. repec:dau:papers:123456789/11029 is not listed on IDEAS
    2. Chemla, Gilles & Touzi, Nizar & Aïd, René & Porchet, Arnaud, 2011. "Hedging and Vertical Integration in Electricity Markets," CEPR Discussion Papers 8313, C.E.P.R. Discussion Papers.

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    More about this item

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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