However, analysis of the electric industry indicates that generation owners with relatively small market share can restrict output for even a small portion of the time and reap substantial profits. Thus, identifying market share and concentration in a relevant retail market is necessary but not sufficient for identifying potential market power abuse. The unique elements of supply and demand for electricity and profit-maximizing strategies of firms will also need to be taken into account. A market is defined as a group of buyers and sellers exchanging goods that are highly substitutable for one another. A relevant market reflects the zone of consumer choice for a good or service.
Substitutability is at the heart of defining the zone of consumer choice.
In the short run, most consumers have no or few substitutes for electricity and therefore very little ability to respond to price changes. This fact allows firms to raise price substantially above competitive cost even in relatively unconcentrated markets. Use fluctuates daily, seasonally, and among consumers. Supply availability and cost changes simultaneously in response to usage patterns and system transmission loading conditions throughout the West. Suppliers will change over time through reciprocity arrangements, mergers and acquisitions.