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The Impact of Different Unbundling Scenarios on Wholesale Prices in Energy Markets

Christoph Bremberger, Francisca Bremberger, and Margarethe Rammerstorfer

Year: 2012
Volume: Volume 33
Number: Number 3
DOI: 10.5547/01956574.33.3.7
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Abstract:
A recent highly disputed subject of regulating energy markets in Europe is the unbundling of vertically integrated up-and downstream firms. While legal unbundling is already implemented in most countries and indisputable in its necessity for approaching regulatory aims, continuative models such as ownership unbundling are still ambiguous. The following article contributes to the economic analysis of identifying the differences of these separate types of unbundling by concentrating on competition effects and the possibility to conceal true marginal costs. Via simulation, we find that legal unbundling yields the lowest prices in a market under Cournot competition. Moreover, under Bertrand competition, no differences between legal unbundling and ownership unbundling can be identified. Keywords: Electricity Market Modeling and Simulation, Cournot Competition, Vertical Relations, Unbundling



Unbundling, Regulation, and Pricing: Evidence from Electricity Distribution

Sven Heim, Bastian Krieger, and Mario Liebensteiner

Year: 2020
Volume: Volume 41
Number: Special Issue
DOI: 10.5547/01956574.41.SI1.shei
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Abstract:
Unbundling of vertically integrated utilities has become an integral element in the regulation of network industries and has been implemented in many jurisdictions. The idea of separating the network, as the natural monopoly, from downstream retailing, which may be exposed to competition, is still subject to contentious debate, as there is much empirical evidence that unbundling eliminates economies of vertical integration, though evidence on overall price effects is still lacking. In this paper, we study the effect of legal unbundling on grid charges in the German electricity distribution industry. Using panel data on German distribution system operators (DSOs), we exploit the variation in the timing of the implementation of legal unbundling and the fact that not all DSOs had to implement unbundling measures. We are also able to identify heterogeneous effects of legal unbundling for different types of price regulation because we observe a switch in the price regulation regime from rate-of-return regulation to incentive regulation during our observation period. Our findings suggest that legal unbundling of the network stage significantly decreases grid charges in the range of 5% to 9%, depending on the type of price regulation in place.





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