The Models of Strategic Interaction between Network and Generating Companies at Electricity Transmission Market

Abstract

The paper considers the strategic interaction between network and generating companies at electricity transmission market within the simplest electric power system with two nodes. The four possible variants of the market organization are investigated: guaranteed regulated and non-regulated network monopoly, network monopoly facing potential competition from the independent network company or generating company. The possible consequences and by-effects of vertical unbundling, in particular, influence of such a regulation on the prices and network transfer capabilities, are analyzed. It is shown that the elimination of monopolistic preferences on electric power transmission with the possibility of network objects building and operation by the generating companies is an effective mechanism for electricity price reduction.oligopoly, monopoly, strategic interaction, potential competition, Nash equilibrium, electricity transmission market