Market power mitigation by regulating contract portfolio risk
(2008) Energy Policy — Vol. 36, n° 10, p. 3787-3796 (2008)
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- Abstract
- Abuse of market power by dominant generation firms is a growing concern in worldwide electricity markets. This paper argues that relying only on general competition rules—as is the case in most European countries—is insufficient and that complementary ex-ante regulation is needed. In particular, regulators should incentivize firms to sign contracts with retailers by regulating their risk exposure. In a simulation model we show that this type of regulation can significantly reduce the deadweight loss in the market, without imposing large costs on regulatees.
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Willems, B., & De Corte, E. (2008). Market power mitigation by regulating contract portfolio risk. Energy Policy, 36(10), 3787-3796. https://doi.org/10.1016/j.enpol.2008.07.008 (Original work published 2008)