IDEAS home Printed from https://ideas.repec.org/p/edj/ceauch/156.html
   My bibliography  Save this paper

A Comparitive Analysis of Market Power Mitigation Measures. The Case of Chile´s Electricity Industry

Author

Listed:
  • María Soledad Arelllano

    ()

Abstract

In a previous paper I found that the implementation of an unregulated wholesale electricity spot market in Chile would result in prices far above competitive levels as a consequence of the unilateral exercise of market power by the largest generators. In this paper I examine whether and how much market power could be mitigated by (a) requiring the largest producer to divest some of its generating capacity to create more competitors and (b) requiring the dominant generators to enter into fixed price forward contracts for power covering a large share of their generating capacity. Splitting the largest producer in two or more smaller firms turns the market equilibrium closer to the competitive equilibrium as divested plants are more intensely used. Contracting practices proved to be an effective tool to prevent large producers from exercising market power in the spot market. In addition, a more efficient hydro scheduling resulted. Conditions for the development of a voluntary contract market are analyzed, as it is not practical to rely permanently on vesting contracts imposed for the transition period. Regulatory mechanisms to provide incentives for producers and consumers voluntary to engage in contracting practices are discussed.

Suggested Citation

  • María Soledad Arelllano, 2003. "A Comparitive Analysis of Market Power Mitigation Measures. The Case of Chile´s Electricity Industry," Documentos de Trabajo 156, Centro de Economía Aplicada, Universidad de Chile.
  • Handle: RePEc:edj:ceauch:156
    as

    Download full text from publisher

    File URL: http://www.dii.uchile.cl/~cea/sitedev/cea/www/download.php?file=documentos_trabajo/ASOCFILE120030422172537.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Frank A. Wolak & Robert H. Patrick, 2001. "The Impact of Market Rules and Market Structure on the Price Determination Process in the England and Wales Electricity Market," NBER Working Papers 8248, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:edj:ceauch:156. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/ceuclcl.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.