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Why did British electricity prices fall after 1998?

Green, Rhonda; Evans, Joanne

Authors

Rhonda Green

Joanne Evans

Abstract

In an attempt to reduce high electricity prices in England and Wales the government has tried to encourage an increase in generation capacity, introduced a more competitive market structure and changed the market rules. Our econometric analysis on monthly data from April 1996 to March 2002 implies support for two conflicting hypotheses. On a static view, increases in competition and the capacity margin were responsible for the fall in prices, while changes in the trading rules had little impact. If generators had been tacitly colluding before NETA, however, the impending change in market rules might have changed their behaviour a few months before the abolition of the Pool. Regressions representing this hypothesis imply that NETA was responsible for a significant part of the reductions in prices after 1998.

Book Type Authored Book
Journal Research memorandum (University of Hull. Business School) ; 35
Peer Reviewed Not Peer Reviewed
Book Title Why did British electricity prices fall after 1998?
ISBN 192034279
Institution Citation Green, R., & Evans, J. Why did British electricity prices fall after 1998?
Keywords Electricity , Market power, Concentration, Market rules

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