Electricity is a market activity rather than an infrastructure service. This service was carried out with a vertically integrated state monopoly due to high barriers to entry and low profit margins in the early periods Following the recommendation of public choice economists, lower and more adequate costs can be attained through competition-based private sector entrepreneurship to render the service more efficient. In this process, a vertically integrated structure was established through independent regulatory authorities and private entrepreneurs, thereby diversifying market structure. A competitive structure has thus been created on the generation, wholesale, and retail side. On the other hand, transmission and distribution activities contain a natural monopoly structure which were subjected to economic regulation to eliminate the market distorting effects of monopolist firms. In this article, the implementation of competition in the electricity market, activity-based competition, economic regulation methods adopted in network activities, as well as how to provide the correct structures in a well-functioning electricity market, will be discussed. It is concluded that the wholesale market is the most important structure in a competitive market and is one of the most important systems in ensuring competition in generation and retail activities. Regarding network regulations practices may vary depending on the electricity market structure and the socio-economic conditions of the market. The price or revenue cap method, where performance indicators are operated effectively, may be one of the most applicable methods.
Key words: Electricity Market, Natural Monopoly, Regulations, Competition, Public Economics. JEL Codes: B21, D02, H41 Article Language: EnglishTurkish
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