The Dynamics of Market Power with Deregulated Electricity Generation Supplies

Deregulated wholesale markets for bulk electricity supplies are likely to deviate from the perfectly competitive ideal in many areas where transmission losses, costs and capacity constraints isolate customers from the effective reach of many generators and limit the number of competitors. In those regions where a few suppliers or marketing agents dominate the market, prices may rise wellabove the comptitive ideal of marginal cost. Furthermore, if all customers do not shift instantaneously to the lowest-priced supplier, perhaps because of inadequate information about the reliability of alternative generators and/or additional investments required to switch suppliers, then depending upon the duration of those lags, the optimal pricing policy of the existing dominant generators may be to ignore the competition for an appreciable period of time. Using previously developed models of dynamic oligopoly pricing, estimates are provided of how rapidly and how far bulk power supply prices might ...

• Type: Conference
• Year: 1998
• Where: HICSS
• Authors: Richard E. Schuler
• Keywords: Biometrics, Bulk Electricity Supplies, Competitive Ideal, Constraints Isolate Customers, HICSS 1998