An Economic Analysis of the National Electricity Market

Abstract

This paper is a technical report commissioned by Energy Consumers Australia, a statutory advocacy institution, as to the state of the electricity market in Australia. Using standard tools of economics, it finds that the combination of market power, vertical integration and a poor regulatory framework deliver a poor outcome in terms of social welfare, as suggested by steep and sustained price increases since 2008. The report advocates for more research, as well as for some already obvious remedies.

Keywords: electricity, public utilities, regulation, market power, vertical integration, competition policy

JEL Classification: L12, L13, L41, L42, L43, L51, L94