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Common Carriage and the Pricing of Electricity Transmission

The electric supply industry in Europe is increasingly under pressure to become more competitive. Deregulation and privatisation in the United Kingdom demonstrate the feasibility of this. Draft directives have already been agreed upon by the European Commission to open access in energy markets. We examine the relationship between generators, transmission networks and consumers within a full information static, short-run framework. We show that open access is desirable if accompanied by common carriage and competition in generation. Common carriage is a necessary but not a sufficient condition for efficient outcomes to emerge. We also discuss the pricing of transmission services under conditions of open access and competition in generation.

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Energy Specializations: Electricity – Transmission and Network Management; Electricity – Markets and Prices ; Electricity – Policy and Regulation

JEL Codes:
D44 - Auctions
D42 - Market Structure, Pricing, and Design: Monopoly
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: Electricity transmission, Common carriage, Competition, Deregulation

DOI: 10.5547/ISSN0195-6574-EJ-Vol13-No3-4

Published in Volume 13, Number 3 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.