I am grateful to the MIT Center for Energy and Environmental Policy Research for financial support and to Paul Joskow, Richard Green, Catherine Wolfram, two anonymous referees and participants at the University of California Energy Institute POWER conference for helpful comments. Richard Green provided me with access to the data on plant efficiencies and outputs. All errors are my own.
Market Power In The England And Wales Wholesale Electricity Market 1995–2000*
Version of Record online: 1 JUN 2007
The Economic Journal
Volume 117, Issue 520, pages 654–685, April 2007
How to Cite
Sweeting, A. (2007), Market Power In The England And Wales Wholesale Electricity Market 1995–2000. The Economic Journal, 117: 654–685. doi: 10.1111/j.1468-0297.2007.02045.x
- Issue online: 1 JUN 2007
- Version of Record online: 1 JUN 2007
- Submitted: 23 August 2004 Accepted: 12 April 2006
This article shows that generators exercised considerable market power in the England and Wales wholesale electricity market in the late 1990s. This is surprising because static oligopoly models predict that falling market concentration should have reduced market power. The article tests the equilibrium assumption of these models that each generator's bids should maximise its short-run profits given the bids of other generators. It finds that the two largest generators could have profitably increased their output from the beginning of 1997. Their behaviour was consistent with tacit collusion.