Abstract
When a utility, such as that found in Quebec, Canada, can export electricity to two markets, the interdependence between export markets is critical in determining the profit-maximizing levels and prices of exports. In this paper a model is specified which verifies econometrically that Quebec in a monopolistic fashion adds a markup term to its marginal costs of export (to the Ontario and New Brunswick-United States markets). This model is then employed to examine the comparative static impact of a rise in variable costs of generating electricity within an export market. The resultant increase in exports to this market, the rise in export prices, and the choking off of exports to the other market is quantified.
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