EPRG 0628

Richard Gilbert, David Newbery

Electricity Merger Policy in the Shadow of Regulation

EPRG 0628 Non-Technical Summary | PDF

Also published in:

  • “Antitrust and Regulation in the EU and US: Legal and Economic Perspectives”, ed. P. Leveque and H Shelanski, Edward Elgar 2010

Abstract: Electricity mergers pose distinctive challenges for competition policy – in market definition and for modelling price impacts in markets with no storage, inelastic short-run demand and transmission constraints. FERC’s pivotal supply test for screening mergers is an improvement on market shares, but still potentially misleading. We counter-propose competitive residual demand analysis. The EU is poorly placed to deal with domestic mergers that impact external energy flows. The paper argues that vertical (convergent) mergers between electricity and gas raise particular concerns, given current EU gas market power, exemplified by the E.On-Ruhrgas merger. The form of the Emissions Trading System amplifies these concerns.

Keywords: merger policy, electricity, gas, convergent mergers, vertical integration, emissions trading

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