CSEM WP 109R Looking for Trouble: Competition Policy in the U.S. Electricity Industry
نویسندگان
چکیده
In the aftermath of the California energy crisis, there has been a shift in the focus of electricity regulators away from the fostering of a competitive market structure and towards the application of regulations to specific market outcomes. Such a focus stands in marked contrast to the general principles governing competition policies in other industries. This shift is in part influenced by the clear failure of earlier attempts to establish a competitive market structure in California. But was this a failure of the policy, or of the tools that were used to implement it? In this chapter, I describe the tests historically used by regulators as screens for the potential abuse of market power by suppliers. More advanced methods, such as models of oligopoly competition, can potentially provide a much better understanding of the competitive outlook for a market. However, much uncertainty surrounds the development and application of such models. I apply an oligopoly model of the California market to actual market data to test the ability of such models to recreate true market outcomes. I also explore the potential impacts of structural changes in the California market on both the supply and demand-side. The results indicate that either a reduction in supplier concentration or an application of realtime pricing to end-users would have yielded cost savings on the order of billions of dollars during the summer of 2000.
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