Journal of Regulatory Economics

, Volume 43, Issue 2, pp 196–213 | Cite as

The NOME law: implications for the French electricity market

Original Article

Abstract

In December 2010, France approved the law “Nouvelle Organisation du Marché de l’Electricité” (or NOME law) to promote competition in the retail electricity market. In practice, the law allows retailers to buy nuclear production from the incumbent, at a regulated access price. This mechanism works up to a ceiling of 100 terawatt hours, which represents one quarter of the incumbent’s production from nuclear plants. Each retailer is assigned a share of that amount proportionally to its portfolio of clients. We contribute to the debate raised by the NOME law regarding the evolution of retail market prices. We show that a price decrease results if the ceiling is sufficiently high compared to the market share of the retailers competing with the incumbent. This pro-competitive effect is stronger when the incumbent’s rivals take into account the impact of their market strategy on the redistribution rule. Finally, we find that, if the regulated price of the NOME electricity is set above the nuclear cost, the incumbent realizes a gain that may result in strategic withholding, weakening the pro-competitive effects of the law.

Keywords

Electricity markets Retail competition NOME law 

JEL Classification

D43 L50 L94 

Notes

Acknowledgments

We gratefully acknowledge the intellectual and financial support from CEPREMAP and the Chair Business Economics from Ecole Polytechnique. We wish to thank participants to the meeting ‘La Loi NOME, une perspective économique,’ June 2010, Ecole Des Mines, Paris for insightful discussions.

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Copyright information

© Springer Science+Business Media New York 2012

Authors and Affiliations

  • Anna Creti
    • 1
  • Jerome Pouyet
    • 2
  • María-Eugenia Sanin
    • 3
    • 4
  1. 1.U. Paris Ouest and Ecole PolytechniqueParisFrance
  2. 2.Paris School of EconomicsParisFrance
  3. 3.University of Montpellier 1, UMR5474 LAMETA, and Ecole PolytechniqueMontpellierFrance
  4. 4.UFR EconomieMontpellierFrance

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