Abuse of Dominance and Antitrust Enforcement in the German Electricity Market

37 Pages Posted: 3 Oct 2017

See all articles by Tomaso Duso

Tomaso Duso

German Institute for Economic Research (DIW Berlin); TU Berlin- Faculty of Economics and Management - Empirical Industrial Organization

Florian Szücs

Vienna University of Economics and Business

Veit Boeckers

Metro AG

Multiple version iconThere are 2 versions of this paper

Date Written: September 18, 2017

Abstract

In 2008, the European Commission investigated E.ON, a large and vertically integrated electricity company, for the alleged abuse of a joint dominant position by strategically withholding generation capacity. The case was settled after E.ON agreed to divest 5,000 MW generation capacity as well as its extra-high voltage network. We analyze the effect of these divestitures on German wholesale electricity prices. Our identification strategy is based on the observation that energy suppliers have more market power during peak periods when demand is high. Therefore, a decrease in market power should lead to convergence between peak and off-peak prices. Using daily electricity prices for the 2006-2012 period and controlling for cost and demand drivers, we find economically and statistically significant convergence effects after the implementation of the Commission’s decision. Furthermore, the price reductions appear to be mostly due to the divestiture of gas and coal plants, which is consistent with merit-order considerations. Placebo regressions support a causal interpretation of our results.

Keywords: Electricity, wholesale prices, EU Commission, abuse of dominance, ex post evaluation, E.ON

JEL Classification: K21, L41, L94

Suggested Citation

Duso, Tomaso and Szücs, Florian and Boeckers, Veit, Abuse of Dominance and Antitrust Enforcement in the German Electricity Market (September 18, 2017). DIW Berlin Discussion Paper No. 1685. Available at SSRN: https://ssrn.com/abstract=3046517 or http://dx.doi.org/10.2139/ssrn.3046517

Tomaso Duso (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

TU Berlin- Faculty of Economics and Management - Empirical Industrial Organization ( email )

Berlin, 10585
Germany

Florian Szücs

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Veit Boeckers

Metro AG ( email )

Metro-Straße 1
Düsseldorf, 40235
Germany

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