Analyzing the Impact of Electricity Market Structure Changes and Mergers

Download or read book Analyzing the Impact of Electricity Market Structure Changes and Mergers written by David Brown and published by . This book was released on 2016 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate how the effects of market structure changes and mergers in restructured electricitymarkets depend on the level of forward contracting. Following Bushnell, Mansur, and Saravia (2008), we develop a Cournot model of Alberta's wholesale electricity market that incorporates firms' forwardpositions. Using data from 2013 - 2014, we estimate the monthly forward positions of the five largestfirms in the market, and simulate the effects of different market structure changes, including variationsof a hypothetical merger with asset divestitures. We examine the sensitivity of the simulated effects ofmergers and other market structure changes to assumptions regarding firms' forward commitments. Wedemonstrate that the wholesale market impacts of mergers and market structure changes depend criticallyon firms' forward commitments in the post market structure change equilibrium. Our paper demonstratesthe importance of establishing a clear understanding of the size and nature of forward commitments inforecasting t.