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Restructured Electricity Markets: California Market Design Enabled Exercise of Market Power
Jim Wells & Dan Haas. California (CA) is part of a broader western market, & electricity is routinely bought & sold across state & nat. boundaries. CA’s electricity industry began operating in a restructured market in April 1998. For 2 years, the state had relatively low wholesale electricity prices, but beginning in May 200, however, wholesale prices rose dramatically in California & stayed relatively high for about a year. This report determines: (1) whether wholesale suppliers of electricity exercised market power by raising prices above competitive levels after restructuring, & if so, (2) what role, if any, the design of California’s market played in facilitating the suppliers’ ability to exercise market power. This analysis is focused on the late summer & early fall of 2000. Charts & tables.
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