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An Analysis of Market Power Mitigation Strategies in Colorado's Electricity Industry

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  • David M. Quick and Janis M. Carey

Abstract

We apply an algorithm that optimizes the generation dispatch for a dominant firm to Colorado's electricity market and show that the dominant electricity generation firm can strategically congest transmission into the region to receive a maximum price over 50% of the time. When it does not get the maximum price, the dominant firm still receives an average markup more than 10% over the competitive price. We use this model to show how mitigation strategies such as enhancing the transmission grid, divesting the dominant firm's generation assets, and promoting entry into the generation market can lower prices in a wholesale electricity generation industry by limiting a dominant firm's market power.

Suggested Citation

  • David M. Quick and Janis M. Carey, 2001. "An Analysis of Market Power Mitigation Strategies in Colorado's Electricity Industry," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 55-78.
    • Handle: RePEc:aen:journl:2001v22-03-a03
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    Cited by:

    1. Quick, David M. & Carey, Janis M., 2002. "Transmission capacity and market power: the effect on a dominant generation firm," Energy Policy, Elsevier, vol. 30(8), pages 699-708, June.
    2. Alberto Orgaz & Antonio Bello & Javier Reneses, 2019. "A New Model to Simulate Local Market Power in a Multi-Area Electricity Market: Application to the European Case," Energies, MDPI, vol. 12(11), pages 1-15, May.
    3. repec:dau:papers:123456789/206 is not listed on IDEAS

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    JEL classification:

    • F0 - International Economics - - General

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