LAUSR

Abstract Using a computer agent based model I compute market power rents in the New Zealand electricity market over the period 2010–2016 and find that these are substantial. Over the 7-year period of the study, total simulated market revenue is $15.2 billion and simulated competitive revenue, using estimated water values and other variable costs, is $9.5 billion. The difference, attributed to market rents, is $5.6 billion, which is 37% of revenue. If I calculate market rents using actual prices (rather than simulated), using my competitive benchmark I find that over the 7-year period total market rents are 6.0 billion, or 39% of revenue – about 10% higher than the results using simulated prices, reflecting slightly higher actual prices. There is some evidence that market power rents have increased since 2013 following partial privatisation of a number of firms. Furthermore there is no evidence of increased market power in dry years.