Restructured Electricity Markets: California Market Design Enabled Exercise of Market Power

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A letter report issued by the General Accounting Office with an abstract that begins "Historically, utility monopolies have generated electricity and sold it to customers at prices set by state regulators. Today, private companies in 24 states compete to sell electricity at market prices determined by supply and demand. California is part of a broader western market in which electricity is routinely bought and sold across state and national boundaries. GAO found evidence that wholesale electricity suppliers exercised market power by raising prices above competitive levels during the summer of 2000 and at other times after the restructuring. Neither GAO's ... continued below

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United States. General Accounting Office. June 21, 2002.

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Description

A letter report issued by the General Accounting Office with an abstract that begins "Historically, utility monopolies have generated electricity and sold it to customers at prices set by state regulators. Today, private companies in 24 states compete to sell electricity at market prices determined by supply and demand. California is part of a broader western market in which electricity is routinely bought and sold across state and national boundaries. GAO found evidence that wholesale electricity suppliers exercised market power by raising prices above competitive levels during the summer of 2000 and at other times after the restructuring. Neither GAO's analysis nor other studies addressed whether market power exercised in California violated federal or other laws. The design of California's electricity market enabled individual wholesale electricity suppliers to exercise market power. Once prices rose, the design was ineffective in returning prices to competitive levels. Prominent experts on market design and industry experts generally agree that two principal market designs flaws increased wholesale suppliers' incentive and ability to raise prices above competitive levels: (1) retail prices were frozen and (2) the California Public Utilities Commission generally prohibited or discouraged long-term contracts between utilities and wholesale suppliers."

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Government Accountability Office Reports

The U.S. Government Accountability Office (GAO) is an independent, nonpartisan agency that works for the U.S. Congress investigating how the federal government spends taxpayers' money. Its goal is to increase accountability and improve the performance of the federal government. The Government Accountability Office Reports Collection consists of over 13,000 documents on a variety of topics ranging from fiscal issues to international affairs.

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  • June 21, 2002

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  • June 11, 2014, 5:03 a.m.

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United States. General Accounting Office. Restructured Electricity Markets: California Market Design Enabled Exercise of Market Power, report, June 21, 2002; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc292903/: accessed December 11, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.