Regulatory objectives and the intensity of unbundling in electricity markets

Regulatory objectives and the intensity of unbundling in electricity markets / Henrik Lindemann. Leibniz University of Hannover, School of Economics and Management, January 2015, 53 p. (Discussion Paper No. 544)

http://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID2558725_code920036.pdf

Despite the positive effect electricity grids separated from generation and supply by ownership are expected to have on the level of competition in the non-network activities, several EU member states still adhere to a solely legally unbundled transmission grid. This choice might be induced by regulators focusing on objectives other than the promotion of consumer interests: theoretically analyzing the decisions an authority takes on both the unbundling regime and the grid charge when it supervises a network monopolist providing a downstream Cournot duopoly with capacity, we find an agency pursuing consumer-oriented goals to always implement Ownership Unbundling. For a regulator acting in the interests of the industry or the government, though, results suggest the authority to be indifferent between Legal and Ownership Unbundling; minor potential drawbacks of a network separated by ownership for the agency or the companies might then tip the scales and cause the regulator to adhere to Legal Unbundling.


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