Survey of Market Power in the Electricity Market with Emphasis on Conditions of Plants in the Network

The electricity industry that has been administrated with integrated vertical structure worldwide is now undergoing dramatic changes. Electricity industry is converting to a competitive industry in which market powers determine the price of electricity, there for it is important to identify market power. The Electricity Market of Iran and Iran Grid Management Company were established in 2003 and 2004, respectively. One of the most important objectives of the restructuring of Iran’s Electricity Market is to establish a competitive environment. The purpose of this study was to assess the level of competition among regional power companies in the electricity market in 2013. The method employed separates the strategic companies from marginal companies by market share index in the hours of peak consumption in summer, and then simulates the performance of the strategic companies using Cournot’s model. Each Cournot (strategic) company aims to maximize its profits, assuming its competitors keep a constant production. This goes on to reach equilibrium, as long as companies do not take advantage of changes in their production. The results of the simulation shows that firms with higher market share at the summer peak hours have been acting strategically in 2013. Another part of the study investigated the circumstances of the power plants of these companies. Lerner’s index was estimated and showed that all the power plants of Tehran’s Regional Electricity Company had an index of higher than 50 percent which is an indicator of their high market power.