Market power analysis in a dynamic electic power industry

Market power analyses are difficult enough to perform even without considering the unique attributes of the electric power industry. These attributes, however, should not stop analysts from using data that is available to properly evaluate issues of market power, nor should they stop policy makers from further deregulating the industry to the extent that workable competition exists. Market power analyses conducted using the system supply curve are reasonable starting points for analyzing competition. However, before determining that competitive problems exist, the full set of competitive options available to competitors in the market must be examined. Failing to account for the full range of competitive options will lead to overly restrictive policy that will fail to reach full benefits of competition that policy makers hope to achieve by restructuring the electric power industry.