Skip to main content
SpringerLink
Log in

Divestiture of Generation Assets in the Electricity Pool of England and Wales: A Computational Approach to Analyzing Market Power

  • Published:
Journal of Regulatory Economics Aims and scope Submit manuscript

Abstract

The task of developing an adequate modeling approach to understanding strategic behavior in competitive electricity markets is still a major open research question. In this paper, we develop an based on computational modeling and simulation. We apply the new approach to analyzing the second round (1999) of capacity divestiture proposals, which the government and regulatory authorities in England and Wales required in order to improve the efficiency of the wholesale power market. In this context, we suggest that, for a second time, the level of market power may be underestimated and that although the proposed amount of divestiture is substantial, it may still be insufficient to avoid the need for further regulatory controls in the short term.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Andersson, B., and L. Bergman. 1995. “Market Structure and the Price of Electricity: An Ex Ante Analysis of the Deregulated Swedish Electricity Market.” The Energy Journal 16(2): 97–130.

    Google Scholar 

  • Branch, E. R. 1993. “Short Run Income Elasticity of Demand for Residential Electricity Using Consumer Expenditure Survey Data.” The Energy Journal 14(3): 111–121.

    Google Scholar 

  • DTI 1998. “Conclusions of the Review of Energy Sources for Power Generation.” Department of Trade and Industry. HMSO Cm4071.

  • Green, R. 1996. “Increasing Competition in the British Electricity Spot Market.” The Journal of Industrial Economics 44(2): 205–216.

    Google Scholar 

  • Green, R. 1999. “The Electricity Contract Market in England and Wales.” Journal of Industrial Economics.

  • Green, R. J., and D. M. Newbery. 1992. “Competition in the British Electricity Spot Market.” Journal of Political Economy 100(5): 929–953.

    Article  Google Scholar 

  • Klemperer, P. D., and M. A. Meyer. 1989. “Supply Function Equilibria in Oligopoly Under Uncertainty.” Econometrica 57 (November): 1243–1277.

    Google Scholar 

  • Kreps, D., and J. Scheinkman. 1983. “Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes.” Bell Journal of Economics 14: 326–337.

    Google Scholar 

  • Littlechild, S. 1996. “Regulation of the Electricity Market.” Speech to the IEA Third Annual Electricity Conference, available from the library at OFFER, Hagley House, Birmingham B16 8QG.

    Google Scholar 

  • MMC. 1996. National Power and Southern Electric, Monopolies and Mergers Commission, HMSO, PO Box 276, London SW8 5DT.

    Google Scholar 

  • NGC. 1998. 1998 Seven Year Statement. National Grid Company, National Grid House, Kirby Corner Road, Coventry, CV4 8JY, England.

    Google Scholar 

  • OFFER. 1991. Pool Price Enquiry. Office of Electricity Regulation, Hagley House, Hagley Road, Edgbaston, Birmingham, B16 8QG.

    Google Scholar 

  • OFFER. 1992. Review of Pool Prices. Office of Electricity Regulation, Hagley House, Hagley Road, Edgbaston, Birmingham, B16 8QG.

    Google Scholar 

  • OFFER. 1993. Pool Price Statement. Office of Electricity Regulation, Hagley House, Hagley Road, Edgbaston, Birmingham, B16 8QG.

    Google Scholar 

  • OFFER. 1994. Decision on a Monopolies and Mergers Commission Reference. Office of Electricity Regulation, Hagley House, Hagley Road, Edgbaston, Birmingham, B16 8QG.

    Google Scholar 

  • OFFER. 1998a. Review of Trading Arrangements—Background Papers 1. Office of Electricity Regulation, Hagley House, Hagley Road, Edgbaston, Birmingham, B16 8QG.

    Google Scholar 

  • OFFER. 1998b. Report on Pool Price Increases in Winter 1997/98. Office of Electricity Regulation, Hagley House, Hagley Road, Edgbaston, Birmingham, B16 8QG.

    Google Scholar 

  • Rubinstein, A. 1991. “Comments on the Interpretation of Game Theory.” Econometrica 59(4): 909–924.

    Google Scholar 

  • Rudkevich, A., M. Duckworth, and R. Rosen. 1998. “Modeling Electricity Pricing in a Deregulated Generation Industry: The Potential for Oligopoly Pricing in a Poolco.” The Energy Journal 19(3): 19–48.

    Google Scholar 

  • Taylor, L. D. 1975. “The Demand for Electricity: A Survey.” Bell Journal of Economics 6(Spring): 74–110.

    Google Scholar 

  • Wolak, F. A., and R. H. Patrick. 1997a. “The Impact of Market Rules and Market Structure on the Price Determination Process in the England and Wales Electricity Market.” University of California Energy Institute. Working Paper No. PWP-047.

  • Wolak, F. A., and R. H. Patrick. 1997b. “Estimating the Customer-Level Demand for Electricity Under Real-Time Market Prices” Mimeo, Department of Economics, Stanford University.

Download references

Author information

Authors and Affiliations

  1. University of California Energy Institute, 2539 Channing Way #5180, Berkeley, CA, 94720-5180, USA

    Christopher J. Day

  2. London Business School, Sussex Place, Regents Park, London, NW1 4SA, UK

    Derek W. Bunn

Authors
  1. Christopher J. Day
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Derek W. Bunn
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

About this article

Cite this article

Day, C.J., Bunn, D.W. Divestiture of Generation Assets in the Electricity Pool of England and Wales: A Computational Approach to Analyzing Market Power. Journal of Regulatory Economics 19, 123–141 (2001). https://doi.org/10.1023/A:1011141105371

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1023/A:1011141105371

Keywords

Search

Navigation