Market power mitigation by regulating contract portfolio risk
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.
Year of publication: |
2008
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Authors: | Willems, Bert ; De Corte, Emmanuel |
Published in: |
Energy Policy. - Elsevier, ISSN 0301-4215. - Vol. 36.2008, 10, p. 3787-3796
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Publisher: |
Elsevier |
Keywords: | European electricity markets Market power mitigation Regulation of contracts |
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