An Assessment of the Deregulation of Electric Power Generation Using Network Models of Imperfect Spatial Markets

Proposals have been made to deregulate the generation of electric power. But unregulated generators would be spatial oligopolists, because transmission costs would insulate them from competition from distant producers. The purpose of this analysis is to estimate the degree to which unregulated power generators would be able to exercise market power. This is accomplished by calculating spatial price equilibria for a hypothetical deregulated power market in New York state. Two types of equilibria arc calculated: Nash/Bertrand equilibria, representing a lower bound to unregulated prices, and limit pricing, defining an upper bound. Equilibria are obtained for the years 1980 and 2000.