The Competitive Effects of Transmission Capacity in a Deregulated Electricity Industry

Severin Berenstein, James Bushnell and Steven Stoft
Authors registered in the RePEc Author Service: Severin Borenstein

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: In an unregulated electricity generation market, the capacity of transmission lines will determine the degree to which generators in different locations compete with one another. We show, however, that there may be no relationship between the effect of a transmission line in spurring competition and the actual electricity that flows on the line in equilibrium. We also demonstrate that limited transmission capacity can give a firm the incentive to restrict its output in order to congest transmission into its area of dominance. As a result, relatively small investments in transmission may yield surprisingly large payoffs in terms of increased competition. We demonstrate these effects in the context of the deregulated California electricity market.

Date: 2000-06-01
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Citations: View citations in EconPapers (202)

Published in RAND Journal of Economics, Summer 2000, vol. 31 no. 2

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Related works:
Journal Article: The Competitive Effects of Transmission Capacity in A Deregulated Electricity Industry (2000)
Working Paper: The Competitive Effects of Transmission Capacity in a Deregulated Electricity Industry (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:13145

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