Unbundling of services in a competitive wholesale market: Lessons from the UK

Technical Report · Fri Mar 01 04:00:00 EST 1996

OSTI ID:254481

Evans, N L ^[1]

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1. Caminus Energy Limited, Cambridge (United Kingdom)

Since the beginning of operation of the electricity Pool in England and Wales in 1990, the energy and capacity components of Pool prices have only to a limited extent reflected changes in supply and demand in the wholesale market. To a greater extent, they have resulted from the specific bidding tactics adopted by dominant generators. These bidding tactics have, in turn, been influenced by the companies` contractual positions (with regard to fuel purchases and electricity sales), their relationship with the regulator, and their longer term strategic objectives. In recent years greater attention has focused on Uplift, the third component of Pool prices. Uplift represents the difference between the Pool Purchase Price (the price received by generators), and the Pool Selling Price (the price paid by suppliers). The costs of Uplift (against which most suppliers are unhedged) have increased considerably since the early years of operation of the Pool, and Uplift revenues have become an important source of profits for the major generators. In this paper the author describes the development of the three key price components in the electricity Pool in England and Wales since its establishment in 1990 and explain the reasons behind the principal price movements. The author focuses on Uplift and discusses the way in which increases in the level of Uplift have led to pressures for greater unbundling of the various Uplift components. This unbundling has been associated with moves to increase the extent to which various Pool services which contribute to Uplift are exposed to competition. The author concludes the paper with a discussion of the messages that emerge for the electricity market as a whole from England and Wales experiences with Uplift.

• Research Organization: Electric Power Research Inst., Palo Alto, CA (United States)
• OSTI ID: 254481
• Report Number(s): EPRI-TR--106232; CONF-960330--
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
COMPARATIVE EVALUATIONS
COMPETITION
DEREGULATION
ELECTRIC POWER INDUSTRY
PRICES
VERTICAL DIVESTITURE