Retail Competition and Electricity Contracts

Richard Green

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

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. Could this lead to less contracting and higher prices? This paper combines a model of electricity retailing and a Cournot model of competition in the wholesale markets to estimate the size of this effect, and finds that it could raise wholesale prices by two or three percent.

Keywords: Electricity; contract markets; retail competition (search for similar items in EconPapers)
JEL-codes: L94 (search for similar items in EconPapers)
Pages: 18
Date: 2004-01
New Economics Papers: this item is included in nep-com
Note: CMI33, IO
References: Add references at CitEc
Citations: View citations in EconPapers (21)

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Related works:
Working Paper: Retail Competition and Electricity Contracts (2003)
Working Paper: Retail Competition and Electricity Contracts (2002)
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