Market power and market games: Evidence from the Spanish electricity market

The main purpose of this paper is to analyse the behaviour of the two major Spanish electricity generator companies, Endesa and Iberdrola, in the Spanish electricity daily market, an uniform price market. The analysis based on the dynamic models cannot be carried on in the present case: in Spain, it's difficult to get the accurate costs of production data. Therefore, we have chosen to analyse Endesa's and Iberdrola's behaviour, through econometric analysis, studying the correlation between the hourly system marginal prices and several factors, namely, the amount of energy supplied by technology and company. This paper shows that Endesa's peak load units determine the marginal price system and that fuel and hydrological factors aren't the most significant factors for fixing the marginal price system. This paper also shows, through endogeneity analysis, that the quantities bid by those companies may not reflect production costs, but market strategies instead.