Does Vertical Integration Always Reduce an Electricity Retailer’s Fixed Price Offer?

Chi-Keung Woo, Kang Hua Cao, Raymond Li*, Han Qi

*Corresponding author for this work

Research output: Contribution to journalJournal articlepeer-review

Abstract

We use a profit-maximizing model of forward pricing, which revealed that an electricity retailer’s fixed price offer (FPO) contains a large forward premium that encourages vertical integration of a generation company and a retailer. However, vertical integration does not always reduce FPOs, particularly when residential customers are segmented by consumption size and price sensitivity. Hence, a proposed merger of a big generation company and a big retailer requires regulatory scrutiny.
Original languageEnglish
Pages (from-to)1-4
Number of pages4
JournalEnergy Research Letters
Volume5
Issue number3
Early online date30 Sept 2023
DOIs
Publication statusPublished - 31 Aug 2024

User-Defined Keywords

  • Vertical integration
  • Fixed price offer
  • Forward premium
  • Wholesale market price volatility
  • Retail market segmentation

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