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Abuse of Dominance and Antitrust Enforcement in the German Electricity Market

Tomaso Duso (), Florian Szücs () and Veit Böckers

No 1685, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: In 2008, the European Commission investigated E.ON, a large and vertically integrated electricity company, for the alleged abuse of a joint dominant position by strategically withholding generation capacity. The case was settled after E.ON agreed to divest 5,000 MW generation capacity as well as its extra-high voltage network. We analyze the effect of these divestitures on German wholesale electricity prices. Our identification strategy is based on the observation that energy suppliers have more market power during peak periods when demand is high. Therefore, a decrease in market power should lead to convergence between peak and off-peak prices. Using daily electricity prices for the 2006 - 2012 period and controlling for cost and demand drivers, we find economically and statistically significant convergence effects after the implementation of the Commission’s decision. Furthermore, the price reductions appear to be mostly due to the divestiture of gas and coal plants, which is consistent with merit-order considerations. Placebo regressions support a causal interpretation of our results.

Keywords: Electricity; wholesale prices; EU Commission; abuse of dominance; ex post evaluation; E.ON (search for similar items in EconPapers)
JEL-codes: K21 L41 L94 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ene, nep-eur, nep-ind, nep-law and nep-reg
Date: 2017
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