Capacity Withdrawals In The Electricity Wholesale Market: Between Competition Law And Regulation (munich Studies On Innovation And Competition)

This Book Examines The Issue Of Capacity Withdrawals In The Electricity Wholesale Market. Electricity Generators Can Exercise Market Power In The Wholesale Market Either By Withdrawing Generation Capacity, Or By Pricing Above Competitive Levels In Order To Achieve A Higher Market Price And, Thereby, Increase Revenues. After A Comprehensive Explanation Of Capacity Withdrawal Practices And The Issues That Arise When Proceeding Under Competition Law, The Book Analyses Whether An Increased State Of Transparency, As Provided For In The Remit And Regulation 543/2013, Could Facilitate The Efficient Functioning Of Electricity Wholesale Markets And The Investigation Of Capacity Withdrawal Practices. It Also Examines The Effect Of The Prohibition Of Market Manipulation As Prescribed In The Remit In Dealing With Abusive Capacity Withdrawals In The Electricity Wholesale Market. Introduction And Research Questions -- General Background -- Competition Law Enforcement -- Transparency -- Regulatory Enforcement. By Panagiotis Tsangaris. Includes Bibliographical References And Index. Preface 7 Contents 9 Chapter 1: Introduction and Research Questions 12 Chapter 2: General Background 13 2.1 Essential Features of Electricity 13 2.2 The European Energy Sector Inquiry 15 2.3 Price Formation on Short-Term Markets 17 2.4 Capacity Withdrawal Practices 22 2.4.1 Physical Withdrawal 22 2.4.2 Economic Withdrawal 26 2.4.3 Difficulty of Proof 28 2.4.3.1 Physical Withdrawal 28 2.4.3.2 Economic Withdrawal 31 2.4.4 Capacity Withdrawals as Unilateral Abuses 33 2.5 The Aftermath of the Sector Inquiry 34 2.5.1 The E.ON Decision 35 2.5.2 The Bundeskartellamt ́s Sector Inquiry 40 2.6 Commitments Decisions 42 Chapter 3: Competition Law Enforcement 46 3.1 Market Definition 46 3.1.1 Relevant Product Market 46 3.1.1.1 A Separate Market for Balancing Services 50 3.1.1.2 Market Definition of the Bundeskartellamt 51 3.1.1.2.1 Criticism 53 3.1.1.2.2 A Separate Market for Renewable Energy 55 3.1.2 Relevant Geographic Market 58 3.2 Market Power 64 3.2.1 Market Shares 66 3.2.2 The Residual Supply Index (RSI) 67 3.2.2.1 Limitations of the RSI 71 3.2.2.2 Complementary Analysis 74 3.2.3 The Return on Withholding Capacity Index (RWC) 76 3.2.3.1 Interpretation and Limitations of the RWC 76 3.2.3.2 The Potential of the RWC 78 3.2.4 The Interpretation of the Bundeskartellamt 78 3.2.4.1 Parallel Individual Dominance 80 3.2.4.2 Argumentation of the Bundeskartellamt 84 3.2.4.3 Application of the RSI 86 3.2.5 Collective Dominance 88 3.3 Abusive Practices 96 3.3.1 Physical Withdrawal 97 3.3.2 Economic Withdrawal 100 3.3.2.1 Marginal Costs Calculation 101 3.3.2.2 Excessive Prices Under Competition Law 103 3.3.2.3 The United Brands Test 106 3.3.2.4 Application of the United Brands Test to the Electricity Wholesale Market 108 Chapter 4: Transparency 113 4.1 Transparency Towards Authorities 113 4.2 Transparency Towards the Market 119 4.2.1 Regulation 714/2009 on Conditions for Access to the Network for Cross-Border Exchanges in Electricity 119 4.2.2 Regulation 543/2013 on Submission and Publication of Data in Electricity Markets 121 4.2.2.1 Benefits of Transparency 122 4.2.2.2 Drawing the Line 124 4.2.2.3 Guidelines on Fundamental Electricity Data Transparency: Disputed Provisions 125 4.2.2.3.1 Relevant Information 128 4.2.2.3.1.1 Short-Run Decisions 129 4.2.2.3.1.2 Medium- and Long-Run Decisions 132 4.2.2.3.2 Price Forecasting and Market Performance 133 4.2.2.3.3 Information Overload 136 4.2.2.3.4 Information Distortion 137 4.2.2.3.5 Unilateral Market Power 139 4.2.2.3.6 Collusive Market Power 141 4.2.2.3.6.1 Risk of Collusion 141 4.2.2.3.6.2 Conditions for Collusion 141 4.2.2.3.6.3 Information Exchange and Collusion 142 4.2.2.3.6.4 Collusion in Electricity Wholesale Markets 145 4.2.2.3.6.5 Transparency as Self-remedy 146 4.2.2.3.7 Disputed Provisions as Adopted in the Final Text 149 4.2.2.3.8 Transparency in Power Exchanges in Europe 152 4.2.2.3.8.1 Nord Pool Spot 152 4.2.2.3.8.2 EEX 157 4.2.2.3.9 Commercial Information Services 159 4.3 Conclusion 161 Chapter 5: Regulatory Enforcement 163 5.1 Prohibition of Insider Trading 163 5.2 Prohibition of Market Manipulation 165 5.2.1 Price Positioning 166 5.2.1.1 Person 167 5.2.1.2 Artificial level 167 5.2.1.3 Legitimate Reasons and Accepted Market Practices 168 5.2.2 Attempt to Manipulate 170 5.2.3 Prohibited Conduct 171 5.3 Need for the REMIT 171 5.3.1 Market Definition 172 5.3.2 Market Dominance 174 5.3.2.1 Establishing Dominance 174 5.3.2.2 More Than One `Dominant ́ Generator 176 5.3.2.3 Establishing Abuse 177 5.4 Overenforcement to Be Avoided 179 5.5 Remedies and Sanctions 181 5.6 Conclusion 187 Table of Cases 190 European Commission Decisions 190 Court of Justice and General Court of the EU Cases 191 National Cases 193 Denmark 193 France 193 Germany 194 Italy 194 Spain 194 Table of Legislation 195 Regulations 195 Directives 196 Other EU Legislative Material 197 National Law 198 Germany 198 UK 199 US 199 Bibliography 200 "This book examines the issue of capacity withdrawals in the electricity wholesale market. Electricity generators can exercise market power in the wholesale market either by withdrawing generation capacity, or by pricing above competitive levels in order to achieve a higher market price and, thereby, increase revenues. After a comprehensive explanation of capacity withdrawal practices and the issues that arise when proceeding under competition law, the book analyses whether an increased state of transparency, as provided for in the REMIT and Regulation 543/2013, could facilitate the efficient functioning of electricity wholesale markets and the investigation of capacity withdrawal practices. It also examines the effect of the prohibition of market manipulation as prescribed in the REMIT in dealing with abusive capacity withdrawals in the electricity wholesale market"--Back cover Front Matter ....Pages i-xi Introduction and Research Questions (Panagiotis Tsangaris)....Pages 1-1 General Background (Panagiotis Tsangaris)....Pages 3-35 Competition Law Enforcement (Panagiotis Tsangaris)....Pages 37-103 Transparency (Panagiotis Tsangaris)....Pages 105-154 Regulatory Enforcement (Panagiotis Tsangaris)....Pages 155-181 Back Matter ....Pages 183-208