lecture_California_electricity_crisis

lecture_California_electricity_crisis - Joint Monopoly...

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Slides for the California Electricity Crisis Energy Markets, Finance, and Policy ECON 489/689
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2 Hourly Electricity Prices During the First 3 Years of “Deregulation” Price in Power Exchange ($/MWh) Time 0 0 250 500 750 1998 1999 2000
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3 Prices of Inputs Used to Generate Electricity (Natural Gas) Source: Joskow (2002)
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4 Benchmark Measure of Market Power Average Markup $(Price-MC) for 5 Firms in California 5-6pm Price- Cost Margin ($/MWh) Time 0 100 200 300 400 500 -100 98Q3 98Q4 98Q2 00Q1 99Q2 00Q2 99Q4 99Q3 00Q3 00Q4 99Q1 Note: in each of these hours, the firms have “extra” capacity
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5 “Unfortunate” Quotes from Traders who Participated in the California Market
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6 “Direct” Evidence? Source: http://www.ferc.gov/legal/ceii-foia/foia/freq-req/11-15-02-appendix.pdf
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7 Were Prices in 2000 as High as Joint Monopoly Prices? 0 200 400 600 800 1000 Price ($/MWh) 00J F M A M J J A S O N Month Perfectly Competitive
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Unformatted text preview: Joint Monopoly Actual Price 2000 Competitive, Actual, and Joint Monopoly Prices 8 Competitive Behavior in the California Electricity Market: Before and After 2000 Markup on Last Unit (P-c in $/MWh) Inframargin (Instrumented -P'q)-20 25 50 75 50 100 150 200 250 300 350 9 Next Class: Issues for Price Cap Debate 1. The pricing behavior led to inefficiency Hint: think productive vs. allocative 2. A cap could reduce inefficiency 3. A hard cap of p cap =$150 will work 1. The pricing behavior did not lead to (much) inefficiency (allocative vs. productive) 2. Hard cap of p cap =$150 poses risks 3. A better proposal than a hard cap is. Pro Cap Against Cap...
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This note was uploaded on 02/20/2012 for the course ECON 489 taught by Professor Nelson during the Fall '08 term at Texas A&M.

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lecture_California_electricity_crisis - Joint Monopoly...

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