Competition and natural monopoly: the case for generation

Some examples and references are used to support the existence of economies of scale associated with the electricity industry; for this, and in accordance with economic theory, the existence of a natural monopoly for electricity generation can be argued. The paper discusses the theory that competition in generation, with the aim of lowering the cost of electricity, can be achieved by other means than the competition between generators over the bidding price. One alternative is the competition between generators with reference to standards fixed by a Regulator, along with the progressive introduction of new low-cost installed capacity. 5 refs., 4 figs