Retail Competition and Electricity Contracts

Richard John Green ()

No 93, Royal Economic Society Annual Conference 2002 from Royal Economic Society

Abstract: Long-term contracts for electricity can counter market power and reduce prices in short-term markets. If electricity retailers face competition, however, companies signing long-term contracts are exposed to the risk that a fall in short-term prices would allow rivals to buy on the spot market and undercut them. This paper combines a model of electricity retailing and a Cournot model of competition in the wholesale markets to show that if retailers are sufficiently risk-averse, their reluctance to sign long-term contracts could cause a sizeable increase in prices.

Date: 2002-08-29

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Working Paper: Retail Competition and Electricity Contracts (2004)
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Persistent link: http://EconPapers.repec.org/RePEc:ecj:ac2002:93

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