Abstract
The paper examines long-run and short-run levels of market power in the liberalised Russian electricity market. We observe that despite potential for market power abuse, actual exercise of market power remained low. We attribute the result to the bid-at-cost rule implemented as a part of a special unit commitment procedure on the day-ahead market. We first look at the industry restructuring and subsequent mergers and acquisitions. The M&A were undertaken in different market zones and did not seem to increase concentration although planned zone integration may worsen competition in the long run. We then examine short-run aspect of market power by estimating hourly price–cost mark-ups and assessing their dynamics in 2010 and 2011, a year preceding and following the market liberalisation, respectively. The hypothesis of actual market power abuse is tested, and rejected, using time series AR models. Further, a Tobit regression shows that the liberalisation decreased the mark-ups by about 1.66 percentage points.
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