Market Power in Power Markets: Evidence from Forward Prices of Electricity

Bent Jesper Christensen, Thomas Elgaard Jensen and Rune Mølgaard ()
Additional contact information
Rune Mølgaard: School of Economics and Management, University of Aarhus, Denmark and CREATES, Postal: 8000 Aarhus C, Denmark

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: We examine the forward market for electricity for indications of misuse of market power. The data source is a unique set of OTC price indications posted by Elsam A/S, the dominant producer in Western Denmark, which is one of the price areas under the Nordic power exchange Nord Pool. The Danish Competition Council (the regulatory government agency) has ruled that Elsam used its dominant position to obtain excessive spot prices over the period July 2003 through December 2006. We show that significant forward premia exist during this period, and that they are related both to spot market volatility and misuse of market power in the spot market, indicating that misuse of market power in the forward market accompanied that which took place in the spot market, according to the regulator?s ruling. This is consistent with the hypothesis that Elsam used the forward market to disguise its spot market manipulation. The findings are consistent across forward premium regressions and structural forward pricing models.

Keywords: Electricity; forward prices; market power; OTC prices (search for similar items in EconPapers)
JEL-codes: G13 L12 (search for similar items in EconPapers)
Pages: 68
Date: 2007-10-26
New Economics Papers: this item is included in nep-com, nep-ene, nep-ind and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://repec.econ.au.dk/repec/creates/rp/07/rp07_30.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2007-30

Access Statistics for this paper

More papers in CREATES Research Papers from Department of Economics and Business Economics, Aarhus University
Bibliographic data for series maintained by ().