Divestiture of generation assets in the electricity pool of England and Wales: A computational approach to analyzing market power

The task of developing an adequate modeling approach to understanding strat egic behavior in competitive electricity markets is still a major open rese arch question. In this paper, we develop an based on computational modeling and simulation. We apply the new approach to analyzing the second round (1 999) of capacity divestiture proposals, which the government and regulatory authorities in England and Wales required in order to improve the efficien cy of the wholesale power market. In this context, we suggest that, for a s econd time, the level of market power may be underestimated and that althou gh the proposed amount of divestiture is substantial, it may still be insuf ficient to avoid the need for further regulatory controls in the short term .