Deregulation and regulation of electricity markets

Sammanfattning: This thesis consists of four essays, mainly related to the fields of industrial organization and political economy. The focus is on deregulation of electricity retail markets and on the continued regulation of parts of such markets after the introduction of competition. The first essay is an empirical essay on the causes of deregulation. The timing of implementation of competition in retail electricity markets in the United States, Canada, Europe, Australia and New Zealand is studied. One conclusion is that there exist important qualitative differences between the United States and Europe. While deregulation in the United States to a large extent seems to have been driven by consumer interest concerns, the influence from interest groups is more pronounced in Europe.The second (theoretical) and third (empirical) essays deal with the interaction between the regulation of distribution networks and the retail market. When the regulated and unregulated operations are conducted within vertically integrated companies the regulation may not only have an effect on the regulated market, but also affect the behavior in the unregulated market. In the third essay a test that uses prices to detect patterns of cross-subsidization is developed and used on Norwegian data. Especially the effects of a regulatory change on cross-subsidization behavior are analyzed. The results both highlight the importance of a well-designed regulation of the regulated market and give support to requirements of vertical separation between regulated and unregulated operations.The fourth essay is a study of domestic electricity demand. It is thus somewhat different than the other papers since it is not directly connected to the issue of electricity market deregulation. Since the energy sector is an essential part of any modern economy and energy production has considerable environmental effects, the sector has for a long time been subject to political interventions. To some extent the policy instruments available to the legislator are reduced by deregulations. The use of taxes to affect prices and thus the demand for electricity may at the same time become an even more important policy instrument and more difficult to implement due to the internationalization of the electricity market.