The efficiency of wholesale vs. retail competition in electricity
- Resources for the Future, Washington, DC (United States)
If markets are sufficiently competitive, the retail model of restructuring is likely to produce a greater array of products and services and lower electricity prices, but the wholesale model may yield lower transaction costs and better encourage transmission investment. Which model is best? The answer is not known yet. A central issue in the debate over restructuring the electric power industry is the extent to which the market should be opened to competition. One aspect of this debate is whether competition ought to be restricted to the wholesale power market or extended all the way to retail customers. Some state regulators have recommended retail competition, while others, including the U.S. Department of Energy, prefer to limit competition to the wholesale level, at least until experience warrants taking the additional step. The purpose of this paper is to describe some of the potential differences in economic efficiency that could arise between the wholesale and retail competition models. The comparison is limited to the qualitative properties of two hypothetical market structures that are intended to reflect the essential differences between wholesale and retail competition. The authors are not concerned with problems of getting from today`s market structure to either end state.
- OSTI ID:
- 486396
- Journal Information:
- Electricity Journal, Journal Name: Electricity Journal Journal Issue: 8 Vol. 9; ISSN ELEJE4; ISSN 1040-6190
- Country of Publication:
- United States
- Language:
- English
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