Measuring market power and the efficiency of Alberta's restructured electricity market

The aim of the analysis is to use the competitive benchmark to measure the severity of market power and inefficiencies in Alberta’s restructured electricity market.11 The approach used to measure market power and inefficiencies is as follows. [...] The coefficients imply price-elasticities of demand of -0.147 and -0.155 for the lagged price and supply shifter IVs, respectively.33 It is without loss of generality to focus on the results from the lagged price IV model in the subsequent analysis.34 29The Alberta temperature variables used are analogous to those defined in the import supply estimation above. [...] The competitive benchmark price is the marginal cost of the highest cost generation unit dispatched to meet the residual demand, where residual demand is estimated to be the market demand net of imports. [...] In the post-2010 period, we observe higher average prices in the hours at the Bottom 25% of the supply cushion compared to those in 2009 and 2010.37 The market power measure across all hours (Total) is considerably higher in the post-2010 period. [...] These findings suggest that there was a change in the degree of strategic behavior in the post-2010 period.38 We observe a smaller decrease in the market power execution measures as we move away from the hours at the Bottom 5% of the supply cushion in the post-2010 period.