ITALIAN POWER EXCHANGE AND UNILATERAL MARKET POWER IN ITALIAN WHOLESALE ELECTRICITY MARKET

摘要

This paper analyses the Italian wholesale electricity market, created by the energy liberalization process started with the European Directive, 96/94/CE, and defined by Law 79/99 and following amendments. The objective is to evaluate whether the Power Exchange launched on March, 31~st 2004 has been effective in reducing main generators’ incentive to exert market power. In this respect, this is an ambitious paper in that it analyses the strategic behaviour in the wholesale electricity market by applying a methodology never adopted in Italy until now. Using data concerning bid offers in the Pool from April to July 2004, we build each generator’s residual demand curve for each day, hour and market zone and so we got the relevant Lerner index. The results suggest the generators play strategically in increasing market price, so they actually exert market power. As expected, Enel Produzione is still the most important generator in terms of market power in all the market zones, except Sardinia, where a duopoly exists with Endesa playing the same role as Enel. This result is confirmed by the joint study published in 2005 by the Italian Antitrust Authority and the Energy Authorities, followed by actions taken by the Antitrust Authority in order to promote greater competitiveness on the Italian electricity market.