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Electricity liberalisation in Britain: the quest for a satisfactory wholesale market design

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  • David Newbery

    (Department of Applied Economics, University of Cambridge,)

Abstract

Britain was the exemplar of electricity market reform, demonstrating the importance of ownership unbundling and workable competition in generation and supply. Privatisation created de facto duopolies that supported increasing price-cost margins and induced excessive (English) entry. Concentration was ended by trading horizontal for vertical integration in subsequent mergers. Competition arrived just as the Pool was replaced by New Electricity Trading Arrangements (NETA) intended to address its claimed shortcomings. NETA cost over £700 million, and had ambiguous market impacts. Prices fell dramatically as a result of (pre-NETA) competition, generating companies withdrew plant, causing fears about security of supply and a subsequent widening of price-cost margins.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • David Newbery, 2004. "Electricity liberalisation in Britain: the quest for a satisfactory wholesale market design," Working Papers EP64, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    • Handle: RePEc:enp:wpaper:ep64
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    References listed on IDEAS

    as
    1. Roger E. Bohn & Michael C. Caramanis & Fred C. Schweppe, 1984. "Optimal Pricing in Electrical Networks over Space and Time," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 360-376, Autumn.
    2. Newbery, D.M. & Pollitt, M.G., 1996. "The Restructuring and Privatisation of the CEGB: Was It Worth It?," Cambridge Working Papers in Economics 9607, Faculty of Economics, University of Cambridge.
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    More about this item

    Keywords

    electricity; liberalisation; market design; market power;
    All these keywords.

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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