analysis of competitive assessment indexes in electricity market of iran

the experience of countries that have liberalized their electricity markets has shown that the assumption that markets will naturally produce a competitive result is not always justified. the most important concern refers to the changes of demand and price which result in providers’ mistreatment. market power is typically defined as the ability to profitably alter prices away from competitive levels. however, detecting and proving the existence of market power in electricity markets is not an easy task. economists and regulators have yet to develop a generally accepted, standardized set of market power monitoring procedures. rather there exists a range of tools, techniques and measures - some drawn from standard industrial organization theory, some especially developed for electricity markets - which are employed to varying degrees by the different market monitors and regulators throughout the world. an ideal index of market power is one that provides in a simple number a measure of the ability to exercise market power. the paper surveys the literature and publicly available information on market power indexes in electricity markets. after reviewing definitions, we examine the various methods of detecting market power that have been employed by academics and market monitors (the statistics of electricity demand and consumptions for the year 2007) and regulators. these techniques include structural, behavioral and functional indices. finally suggestions have been highlighted to determine the best location for developing the powerhouse in order to solve the mentioned problems.