Market power mitigation by regulating contract portfolio risk

Bert Willems and Emmanuel De Corte

Energy Policy, 2008, vol. 36, issue 10, 3787-3796

Abstract: Abuse of market power by dominant generation firms is a growing concern in worldwide electricity markets. This paper argues that relying only on general competition rules--as is the case in most European countries--is insufficient and that complementary ex-ante regulation is needed. In particular, regulators should incentivize firms to sign contracts with retailers by regulating their risk exposure. In a simulation model we show that this type of regulation can significantly reduce the deadweight loss in the market, without imposing large costs on regulatees.

Keywords: European; electricity; markets; Market; power; mitigation; Regulation; of; contracts (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (13)

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