Measuring and managing unilateral market power in electricity

Summary form only given. The past two decades of international experience with wholesale electricity markets has demonstrated that significant consumer harm can result from firms simply engaging in unilateral profit-maximizing behavior given the actions of their competitors. Different from other product markets, coordinated actions among suppliers or the concentration of production capacity in the hands of small number of firms is unnecessary for electricity suppliers to be able to raise prices substantially above competitive levels. This talk presents settlement period-level measures of the inverse of the elasticity of residual demand curve, 1/εhj, possessed by a collection of large suppliers the California, Australian and Colombia wholesale electricity markets. These markets differ along a number of dimensions.