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Staropoli, Carine --- "Reforming the Reform in the Electricity Industry: Lessons from the British Experience" [2003] ELECD 45; in Glachant, Jean-Michael; Finon, Dominique (eds), "Competition in European Electricity Markets" (Edward Elgar Publishing, 2003)

Book Title: Competition in European Electricity Markets

Editor(s): Glachant, Jean-Michael; Finon, Dominique

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843761785

Section: Chapter 3

Section Title: Reforming the Reform in the Electricity Industry: Lessons from the British Experience

Author(s): Staropoli, Carine

Number of pages: 23

Extract:

3. Reforming the reform in the
electricity industry: lessons from
the British experience
Carine Staropoli

The Electricity Pool of England and Wales, created in 1990, was one of the
first organized wholesale electricity markets, and has performed satisfac-
torily in some, but not all respects. Its main achievements include mainte-
nance of security and quality of supply, ease of entry by new generators
and the introduction of competition in supply. However, it soon became the
focal point of the criticisms aimed at electricity deregulation in England
and Wales, and in October 1997 the Minister for Science, Energy and
Industry asked the Director-General of Electricity Supplies to consider
how a review of electricity trading arrangements might be undertaken.
The design of the Pool has been an issue since the very beginning; those
who designed it knew that they had not designed the perfect market, if
indeed one exists. The main area of concern has been the Pool's inability to
prevent market power abuse, and many different forms of strategic behavi-
our have been observed, revealing that it is relatively easy to game the rules
of the Pool. The dominant heat generators (also the incumbents), namely
National Power and PowerGen, were found to have used their positions of
market power to increase Pool prices by significant amounts in certain
periods, when other market conditions and cost trends should have taken
them downwards instead. In addition some generators, sometimes even
small ones, have exploited `local market power' in the congested areas, ...