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Faculty of Economics

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Chernenko, N.

Market power issues in the reformed Russian electricity supply industry


Abstract: The paper examines long—run and short—run levels of market power in the liberalised Russian electricity market we observe that despite potential for market power abuse, actual exercise of market power as measured by Drice-cost markups remained low. we attribute the result to the bid-at--cost rule mplemented as a part of a special unit commitment procedure on the day-ahead market. we first look at the restructured industry and discuss the mergers and acquisitions and their impact on competition in long term. The M&A were undertaken in different market zones and thus did not seem to increase concentration (HHI remains almost unchanged) although with future zone nteration competition in long run is put at risk, we then examine short run 1eve of market power by estimating hourly price cost mark-ups and assess my their dynamics in 2010 and 2011, a year preceeding and following the market liberalisation respectively. Using time series models (AR models) we reject hypotnesis of actual market power abuse Further, using a lob-it regression we find that the liberalisation decreased the mark-ups by about 1 66 percentage points.

Keywords: Russian electricity market, liberalisation, market power,concentration, price-cost mark-ups

JEL Codes: L11 L13 L94


EPRG Paper Link: 1333

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