Cross-subsidies in the electricity sector
(2008) Competition and Regulation in Network Industries — Vol. 9, n° 3, p. 201-227 (2008)
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- Abstract
- Most firms in the electricity sector are vertically integrated. Often these integrated firms are accused of using income generated in the regulated sector in order to cross-subsidize their unregulated activities. This cross-subsidization is said to distort the level-playing field and lead to an unfair competition between incumbent and entrants. In this paper we argue that cross-subsidies are a normal business practice which should only be a concern when they are part of anti-competitive practice such as a price squeeze or predatory pricing. If the government is concerned about those practices, it should evaluate the sector using a similar analysis as developed under Article 82 EC, regardless of whether cross-subsidies are involved.
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Citations
Willems, B., & Ehlers, E. (2008). Cross-subsidies in the electricity sector. Competition and Regulation in Network Industries, 9(3), 201-227. https://doi.org/10.1177/178359170800900301 (Original work published 2008)