Diagnosing Market Power in California's Deregulated Wholesale Electricity Market

Severin Borenstein, James Bushnell and Frank Wolak

Competition Policy Center, Working Paper Series from Competition Policy Center, Institute for Business and Economic Research, UC Berkeley

Abstract: Effective competition in wholesale electricity markets is the cornerstone of the deregulation of the electricity generation industry. We examine the degree of competition in the California wholesale electricity market during June-November 1998 by comparing the market prices with estimates of the prices that would have resulted if all firms were price takers. We find that there were significant departures from competitive pricing and that it was most pronounced during the highest demand periods. Overall, this raised the cost of power purchases by about 22% above the competitive level. We also explain why the prices observed cannot be attributed to competitive peak-load pricing.

Keywords: California; deregulation; electricity market (search for similar items in EconPapers)
Date: 1999-07-01
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Citations: View citations in EconPapers (7)

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