Structure and Performance in Europe: A Review of the Report for DG Comp

Tue May 08 12:24:19 EDT 2007
By Oscar Arnedillo

The European Commission has just published a report by London Economics which appears to show that electricity market prices are higher than expected, given the costs of production. The Commission attributes the higher margins to the exercise of market power, made possible by a concentrated industry structure in each market. The finding is surprising, since it covers markets such as Britain which many (including the national regulator) regard as competitive. In this Energy Regulation Insight, Oscar Arnedillo of NERA’s energy team dissects the analysis in the report and identifies a number of flaws that suggest the report provides no basis for regulatory intervention.

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