Vertical Integration and Market Power in Electricity Markets

Vertical Integration and Market Power in Electricity Markets

Vertical separation of generation from electricity retailing has often been required as a condition of electricity market liberalisation. A well-developed and liquid contracts market is similarly suggested as necessary to manage the resulting wholesale market risks, which risks are further exacerbated by competition. Such contracts markets are rare, however, and increasingly evidence is emergin...

Hedging and Vertical Integration in Electricity Markets

This paper analyzes the interactions between competitive (wholesale) spot, retail, and forward markets and vertical integration in electricity markets. We develop an equilibrium model with producers, retailers, and traders to study and quantify the impact of forward markets and vertical integration on prices, risk premia and retail market shares. We point out that forward hedging and vertical i...

Predicting market power in wholesale electricity markets

The traditional measure of market power is the HHI, which gives implausible results given the low elasticity of demand in electricity spot markets, unless it is adapted to take account of contracting. In its place the Residual Supply Index has been proposed as a more suitable index to measure potential market power in electricity markets, notably in California and more recently in the EU Sector...

Reevaluation of Vertical Integration and Unbundling in Restructured Electricity Markets

Understanding Competitive Pricing and Market Power in Wholesale Electricity Markets

In the ̄rst year of the deregulated California electricity market, a number of issues have arisen that relate to the competitiveness of the wholesale electricity market in the state. There have been lively debates over the need for price caps in the California Power Exchange (PX) day-ahead market and the California Independent System Operator's (ISO) real-time and ancillary services markets. The...