Cointegration analysis of spot electricity prices: insights on transmission efficiency in the western US

• Published in: Energy economics Vol. 21; no. 5; pp. 435 - 448
• Main Authors: De Vany, Arthur S., Walls, W.David
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01.10.1999; Elsevier Science; Elsevier; Guildford :IPC Science and Technology Press,1979; Elsevier Science Ltd
• Series: Energy Economics
• Subjects: Applied sciences; Economic data; Economic efficiency; Electric energy; Electricity; Electricity distribution; Electricity spot markets; Energy; Energy economics; Exact sciences and technology; General, economic and professional studies; Market integration; Market prices; Open transmission; Peak load pricing; Prices; Regional markets; Studies; U.S.A; United States; North America; America; United States > US; Open transmission; Market integration; Q4; Electricity spot markets; L94; Deregulation; Cointegration; Off peak hour; Time series; Electric energy; Markets; Peak period; Error correction; Spot price
• ISSN: 0140-9883; 1873-6181
• DOI: 10.1016/S0140-9883(99)00019-5

The US Energy Policy Act of 1992 promoted the development of spot markets for electric power by requiring utilities to open their transmission systems to wholesale power sales. In this paper, we specify and estimate a vector error correction model using peak and off-peak electricity spot prices during 1994–1996 covering 11 regional markets in the western United States and test these prices for evidence of market integration. The results show evidence of an efficient and stable wholesale power market.