‘Retail Electricity Competition’

We explore the implications of load profiling of consumers whose traditional meters do not allow for measurement of their real time consumption. We find the competitive equilibrium does not support the Ramsey two-part tariff. By contrast, when consumers are billed on real time prices and consumption, retail competition yields the Ramsey prices even when consumers can only partially respond to variations in real time prices. We then examine the incentive competitive retailers have to install one of two types of advanced metering equipment. Competing retailers overinvest in real time meters compared to the Ramsey optimum, but investment incentives are constrained optimal given load-profiling and retail competition. Finally, we consider the effects of physical limitations on the ability of system operators to cut off individual customers. Competing retailers have no incentive to determine the aggregate value of non-interruption of consumers, preferring instead to free-ride on other retailers serving the same zone.

A Quantitative Analysis of Pricing Behavior In California’s Wholesale Electricity Market During Summer 2000

During the Summer of 2000, wholesale electricity prices in California were nearly 500% higher than they were during the same months in 1998 or 1999. This price explosion was unexpected and has called into question whether electricity restructuring will bring the benefits of competition promised to consumers. The purpose of this paper is to examine the factors that explain this increase in wholesale electricity prices. We simulate competitive benchmark prices for Summer of 2000 taking account of all relevant supply and demand factors --- gas prices, demand, imports from other states, and emission permit prices. We then compare the simulated competitive benchmark prices with the actual prices observed. We find that there is a large gap between our benchmark competitive prices and observed prices, suggesting that the prices observed during summer 2000 reflect, in part, the exercise of market power by suppliers. We then proceed to examine supplier behavior during high-price hours. We find evidence that suppliers withheld supply from the market that would have been profitable for price-taking firms to sell at the market price.electricity, market power, deregulation

Reliability and Competitive Electricity Markets

Deregulation of the electricity sector has resulted in conflict between the economic aims of creating competitive wholesale and retail markets, and an engineering focus on reliability of supply. The paper starts by deriving the optimal prices and investment program when there are price-insensitive retail consumers, and their load serving entities can choose any level of rationing they prefer contingent on real time prices. It then examines the assumptions required for a competitive wholesale and retail market to achieve this optimal price and investment program. The paper analyses the implications of relaxing several of these assumptions. First, it analyses the interrelationships between regulator-imposed price caps, capacity obligations, and system operator procurement, dispatch and compensation arrangements. It goes on to explore the implications of potential network collapses, the concomitant need for operating reserve requirements and whether market prices will provide incentives for investments consistent with these reserve requirements.electricity, regulation, incentives

Service Orientation and the Smart Grid state and trends

The energy market is undergoing major changes, the most notable of which is the transition from a hierarchical closed system toward a more open one highly based on a “smart” information-rich infrastructure. This transition calls for new information and communication technologies infrastructures and standards to support it. In this paper, we review the current state of affairs and the actual technologies with respect to such transition. Additionally, we highlight the contact points between the needs of the future grid and the advantages brought by service-oriented architectures.

Vertical integration and firm boundaries : the evidence

Since Ronald H. Coase's (1937) seminal paper, a rich set of theories has been developed that deal with firm boundaries in vertical or input–output structures. In the last twenty-five years, empirical evidence that can shed light on those theories also has been accumulating. We review the findings of empirical studies that have addressed two main interrelated questions: First, what types of transactions are best brought within the firm and, second, what are the consequences of vertical integration decisions for economic outcomes such as prices, quantities, investment, and profits. Throughout, we highlight areas of potential cross-fertilization and promising areas for future work