COMPETITION VERSUS REGULATION IN BRITISH ELECTRICITY GENERATION

This paper presents an appraisal of the electricity generation market in England and Wales from its inception to the date of the imposition of the Pool price cap. Spot (Pool) prices were lower than expected but rose strongly. A theoretical discussion and an empirical analysis is conducted and it is argues that, although the Pool was intended to be competitive, this pattern of prices was driven first and foremost by the effect of contracts and, second, by implicit regulation. In other words, prices have been driven largely by intervention, rather than by competition. Further, it is suggested that the undertakings agreed with the regulator may foster co-operation rather than competition and that regulatory attention will be required for the foreseeable future in the 'competitive' market for generation.