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Retail Competition and Electricity Contracts

Author

Listed:
  • Green, Richard

    (University of Hull)

Abstract

Long-term contracts for electricity can counter market power and reduce prices in short-term markets. If electricity retailers face competition, however, companies signing long-term contracts are exposed to the risk that a fall in short-term prices would allow rivals to buy on the spot market and undercut them. This paper combines a model of electricity retailing and a Cournot model of competition in the wholesale markets to show that if retailers are sufficiently risk-averse, their reluctance to sign long-term contracts could cause a sizeable increase in prices.

Suggested Citation

  • Green, Richard, 2002. "Retail Competition and Electricity Contracts," Royal Economic Society Annual Conference 2002 93, Royal Economic Society.
    • Handle: RePEc:ecj:ac2002:93
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    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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