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Market Power
Evolution of the electric power industry from a regulated monopoly to an unbundled set of inter-related production, supply and distribution businesses has forced participants to examine what constitutes market power and how it can be constrained. Traditional tools, such as the Hirschmann-Herfindahl Index (HHI), are of limited application to electricity markets because of the difficulty in defining the market appropriately. To date, these questions have arisen mainly in generation markets; ultimately, they may also be of concern in creating competitive retail markets as well.
Our detailed knowledge of issues such as market definition, concentration ratios, and price tests has been frequently applied to regulatory filings before state commissions, the Federal Energy Regulatory Commission (FERC), and regulatory and market institutions worldwide. For example, we helped to draft Section 203 and Section 205 filings under the Federal Power Act associated with the acquisition of US generating capacity.
London Economics has developed sophisticated models which move beyond simplistic concentration ratios to focus on the actual impact individual firms can have on market prices. We have also helped to develop contractual mechanisms to mitigate market power in jurisdictions where divestiture is unfeasible. In addition, we have created a wide range of policy position papers for a variety of clients which analyze market power in key markets, assess policy alternatives, and identify implications for return on investment.
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 Regulatory Economics
Performance Based Ratemaking
Electricity Market Design
Unbundling
Market Power
Indicative Work
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