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Market power in Norwegian electricity market: Are the transmission bottlenecks truly exogenous?

Faisal Mehmood Mirza, Olvar Bergland

Year: 2015
Volume: Volume 36
Number: Number 4
DOI: 10.5547/01956574.36.4.fmir
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Abstract:
In this paper, we test whether producers in the southern Norway price zone utilize information on available transmission capacity to induce transmission congestion in their price zone to exercise market power or not. Endogeneity results for import congestion suggest that congestion is endogenous during late night and morning hours implying that producers in southern Norway restrict their output to induce transmission congestion into their price zone. We find an average markup of about 19.5 percent above the marginal cost during these hours. These results point that NordPool's policy of making transmission capacity information public to ensure market transparency is not welfare maximizing as strategic producers can use this information to anticipate and induce transmission congestion into their price zone for driving prices away from the competitive levels.



Impact of High-Powered Incentive Regulations on Efficiency and Productivity Growth of Norwegian Electricity Utilities

Livingstone Senyonga and Olvar Bergland

Year: 2018
Volume: Volume 39
Number: Number 5
DOI: 10.5547/01956574.39.5.lsen
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Abstract:
This study examines the hypothesis that changes to high-powered incentive regulations have a positive efficiency and productivity growth effects in a regulated electricity distribution industry. We estimate an input distance function using the stochastic frontier analysis method to compute technical efficiency scores for 121 Norwegian utilities over the period 2004-2012. We explore sources of productivity growth by parametrically decomposing the Malmquist productivity index into efficiency change, technical change, and scale change. Unlike previous studies, we examine the difference in performance across two regulatory regimes: yardstick competition (2007-2012) and RPI-X incentive regulation (2004-2006). Results show significant efficiency and productivity growth improvements with embodied technical change as the main driver.Keywords: Yardstick competition, Productivity growth, Efficiency, Input distance function, Stochastic frontier analysis, Electricity distribution, True fixed effects model





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