Market Power and Scale Economies of the Electricity Industry: Comparison Before and After the Reform

This work uses nonlisted company samples from 1999 to 2007 to study the market power and scale economies before and after electricity market reform. The results of empirical research show increasing market power and slightly greater scale economies, but the whole industry could not share the benefit from the scale economies. From the perspective of the business category, the power-generation sector obtained more benefit from the reform: Its market power increased, and the scale economies were slightly greater; however, the market power of the grid had been constrained but at the cost of decreased scale economies. It is concluded that the market-oriented reform in 2002 was only an adjustment of the “rules of the game” between state-owned enterprises, not involving other stakeholders, so it was difficult to form an energetic, continuous, and predictable market structure.