What deregulation means
The term liberalization or deregulation generally refers to the “abolition of rights of monopolies, creating a competitive market that guarantees fair prices for the consumers and efficient economic cost of supplying electricity. Three economic conditions are a “prerequisite” to a competitive market in order to achieve a successful transformation from a highly regulated monopolistic to a transparent and deregulated market:
- Free consumer choice: consumers must be able to freely choose their electric energy supplier after having compared prices and services of competing electricity supply companies),
- Third party access (TPA): free and competitive market has to guarantee unimpeded access to transmission and distribution networks for companies which do not own them. Otherwise, competition in the electricity market would not be possible due to the physical characteristics and the natural monopolistic market design within the sector
- Unbundling: transmission and distribution networks have to be separated from the generation and retail business of vertically integrated utilities
Description of the electricity market
First of all, it is to mention that the electricity sector is a comparatively complex one. This complexity and singularity can be explained on the basis of three categories: constituent parts of the sector, physical characteristics and the specific market design.
1) Constituent parts of the electricity sector
The electricity sector
This essay will detail the impact of EU liberalisation policy on the UK energy industry and relate this to a previous sample of a group of suppliers. This essay will discuss industry supplier concentration, oligopoly and monopolistic competition, the EU competition commission and potential single markets which are not yet subject to scrutiny by the competition commission.
Many utilities are monopolies by having the entire market share in certain areas. With deregulation of these utilities, the market becomes open to competition for market share to begin. In terms of regulation of monopoly, the government attempts to prevent operations that are against the public interest, call anti-competitive practices. Likewise, oligopoly is a market condition where there are minimal distributors that have a major influence on prices and other market factors. This causes market failure, especially if evidence of collusive behavior by dominant businesses is found.
What makes electric utilities (Con Edison) monopolistic and why? Support your answer by referring to AT LEAST 2 FORCES outlined in MICHEAL PORTER’S Five Forces of Analysis
Ontario’s electricity industry timeline starts from 1906 after the establishment of Hydro-Electric Power Commission of Ontario (HEPCO), a state-owned natural monopoly company. During 1970s to 1990s Ontario’s electricity planning was accomplished to reduce the Ontario Hydro’s debt (formerly HEPCO) which “did not pay the taxes nor intended to generate the profit” . The economic recession, and the inflation caused heavy cutting off the electricity demand which became the major setback and increasing cost of nuclear power plant had heavily increased the debt of Ontario hydro. In order to address the situation Ontario Hydro published a white paper to restructure Ontario Hydro. Ontario’s modern electricity
The success of ELECTricity is dependent on a clear accountability structure with our internal leadership and external strategic partners. We are held accountable to standard metrics and a commitment to creating social value. This allows us to focus on scaling the impact, not the
The present midterm exam has as purpose to evaluate, comparing and contrasting how the Energy Policy Act (2005) got passed and signed, using as a guidance Kingdon (1995) and Smiths & Larimer’s (2013) concepts about agenda setting and decision making in public policy.
The energy industry has seen some changes by way of deregulation in the supply of energy for both businesses and residential. Giving the power to owners to choose who supplies them electric and natural gas and at what rate they want it supplied because of the competition from suppliers, some supplier offering rate as low as $0.0619 per KWH. These new regulations policy has initiated changes in the mode of operation of American electric power (AEP) with the supply of energy.
Owning major electricity assets both in the UK and the US allows National Grid plc to control operations in England and Wales via NGP Electricity Transmission which is also its subsidiary. As mentioned earlier, National Grid plc also controls electricity transmission in the US (New York and New England) making the operations for electricity transmission, more effective. With regard to their gas distribution operations, as also mentioned earlier, providing for 3.5 million consumers further strengthens the market position of National Grid plc. The National Grid plc, due to its major consumers coming from central geographical positions, gives it an economical gain over other companies. Lastly, the varied operations (UK Transmission, UK Gas Distribution, US Regulated and other activities) it controls in the UK and the US gives it enough leverage when it comes to reducing the potential business jeopardies it might
In "The Case for Decentralized Generation of Electricity”, Thomas Casten and Brennan Downes summarize an extensive research that Casten and a team of researches went through in order to develope a new, more economically efficient, source of generating power. Casten and Downes incorporated past and present statistics of electricity generation in order to prove to the reader that they are determined to search for new power sources and also that they are reliable sources of information. What the research team came up with was ‘central generation’ which are a network of power stations with each power station being able to distribute power and energy locally to numerous buildings and homes within the vicinity. By writing this article, Casten and
Deregulation is believed to be one of the major factors that led to the 2008 Financial Crisis. Deregulation refers to the reduction of governmental influence in an industry in order to create more competition (“Deregulation”, 2015). The reduction in government influence creates a more competitive market that
Microeconomic theory holds that for a market to be perfectly competitive, it needs to have the following three properties: 1) product sold must be uniform across all sellers, i.e. there’s no differentiation between producers; 2) there must be many buyers and sellers, such that no one seller or buyer can affect the market price; 3) all agents participating in the market have perfect information. As opposed to commodities that might be well suited for this perfect competition framework, electricity has unique features that make the framework less applicable. The chief differentiating characteristic of electricity is that it cannot be stored. Although some amounts could be stored in batteries, that is not enough to power a country. Electricity must be generated and transmitted as it is consumed (Perez Arriaga 2013). The implication for market mechanism is that supply and demand at a particular time period would balance not based on extra storage but on additional generation capacity available. Second, electricity is not a homogenous commodity. There’s a distinction between generators that supply power on a continual basis (e.g. electricity derived from coal, hydropower, nuclear power) and generators that are on only during peak hours (e.g. natural gas and oil-fired generators). Thus, generation sources are not perfect substitutes of one another. Third, the end-user of electricity is
Analysis of the U.S. electricity revolution and California electricity crisis-What should Chinese Energy market learn?
According to the case study written by Jurek, Bras, Guldberg, D’Arcy, Oh, and Biller, energy costs were steadily rising and were predicted to continue this trend going into the future. At the same time, utility companies were beginning to implement Smart Grid technologies to increase the efficiency of energy distribution. One resulting program to emerge from
Australia, much like the rest of the Western World, is becoming or has became a deregulated electricity sector. For our purposes, why a country deregulates can vary. As started in my previous essay, most of Australia’s privatization or deregulation of the utilities including electricity came down to two factors, one being money and following patterns of the other western countries who also have deregulated their electricity sectors and other utilities. However discussing only about deregulation and alternative energy portfolio standards is what we are focusing on.
This market allows organization a free long term ability to adjust their good services and prices with the changes in the market conditions. Thus AT&T should take advantage of the freedom in this market structure and ensure that their supply and prices are correlated to their demands.