Regulatory Threat in Vertically Related Markets: The Case of German Electricity

This paper applies the concept of regulatory threat to analyse the electricity supply industry in Germany, where in contrast to other European member states there is no ex-ante regulation of network access charges. Instead, network access relies on industrial self-regulation and ex-post control by the Cartel Office. The paper extends the concept of regulatory threat to vertically related markets, stressing an optimal balance between the level of the network access charges and discrimination against third parties. The conceptual framework appears to explain developments in the German electricity sector accurately and thus provides a useful tool for policy analysis.