Managers And Leaders

OLIGOPOLY, THE ELECTRICITY GAME

This essay is focused to oligopoly as market structure, exemplified in the case of the electricity bill of Spanish households. One of the mysteries of the domestic economy of the Spanish families is that invoice. Year after year they are increasing their cost without a clear explanation. In this essay I will try to explain the operation of the energy market in Spain and where this increase does continued.

First, we must define what an oligopoly is. An oligopoly is a market situation in which a small number of selling firms control the market supply of a particular good or service and are therefore able to control the market price. An oligopoly can be perfect-where all firms produce an identical good or service (cement)-or imperfect-where each firm's product has a different identity but is essentially similar to the others (cigarettes). Because each firm in an oligopoly knows its share of the total market for the product or service it produces, and because any change in price or change in market share by one firm is reflected in the sales of the others, there tends to be a high degree of interdependence among firms; each firm must make its price and output decisions with regard to the responses of the other firms in the oligopoly, so that oligopoly prices, once established, are rigid. This encourages nonprice competition, through advertising, packaging, and service-a generally nonproductive form of resource allocation. My example of oligopoly in Spain is the Electricity Companies.

Electricity in Spain is the third most expensive in Europe, however, the power companies continue to close the year with stratospheric profits.

How is it possible?

The mystery of the electricity bill in Spain was "the fare or toll hits". These toll roads are a number of costs or items are increased considerably in the recent years and have resulted in the rise of light. They are:

• Transmission and distribution of electrical energy.

• Special rates for large industrial

• Premiums mainland, subsidies given to the islands to Ceuta and Melilla

• Premiums for encouraging the development of renewable energy: an incentive is given to a technology that is under development but the problem was: where is encouraged? Who encourages you? Who pays? And how much is paid? The problem is that it did not control the number of facilities that were to be installed and today the number stands at 7,000 million euros. Therefore they also decided that the subsidies for renewable energy were applied into the tolls.

• Tariff Deficit: It's like the public deficit. For example if the electricity they estimate that costs 10 € including electricity supply you, the Government considers it too high and you cannot raise the rate to citizens but the cost is. Then pay more relapsing agrees that cost on the citizens who will gradually paying your electricity bill. All to keep up the rate. Political motives postponed this climb. So the citizens are not paying the cost of electricity to utilities. The accumulated debt amounts to 24,000 million euros. The tariff deficit is decided during the first government of the Popular Party with Rodrigo Rato as Finance Minister. The Minister of Finance decided that the light could not rise above inflation. Thus, the light because you fell the charge, but also do not forgive that debt that was generated.

Is there an energy policy today? The answer is NO.

With everything and more, we can read news like: "The three major Spanish utilities Iberdrola, Endesa and Gas Natural Fenosa amounted to a net profit of 6.3415 billion euros in 2011"

How much money can earn assuming that debt is 24,000 million euros? Because the tariff deficit on your bills says you have a relative effect. When the debt was generated electricity company claimed that debt, by the same mechanism that is placed on the public debt of the State. The electricity sold that debt to banks and investors and the bank is to be paid to in the coming years the tariff deficit to an interest rate, so that the debt we owe the citizens with electric power is not with them but it is with the banks or whoever bought the debt. There was an attempt to get a waiver but it turned out like no electrics are now creditor unless the creditor is a bank, a bank never forgives a debt.

But we can read headlines we see as the electric bill increases by 70% without reducing the tariff deficit.

How

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