Of course, things are not quite that simple in the case of electricity, where short term demand is mostly a given, and prices are thus determined by the marginal price - i.e. the costliest producer needed at that time.

But what this means is that new, nimble entrants can theoretically come in, bid low prices, and enjoy the higher prices set by the marginal producers (which will be determined by the capacity of the big players).

And of course, banks can sell lots of hedges and other financial products on the back of these markets.

What makes EDF positively hated is that, thanks to its massive nuclear capcity, the marginal price it can propose is the same as the cheapest baseload around, which prevents the small, gas-fired players from skimming off the market.

EDF is too competitive, thus it needs to be broken up so that competition can flourish in the higher price environment that EDF's destruction would create...

In the long run, we're all dead. John Maynard Keynes

Why did British Electricity Prices Fall after 1998?
Joanne Evans
Richard Green

Abstract: In an attempt to reduce high electricity prices in England and Wales the government has reduced concentration among generators and introduced New Electricity Trading Arrangements (NETA). Econometric analysis on monthly data from April 1996 to September 2002 implies support for two conflicting hypotheses. On a static view, increases in competition and the capacity margin were chiefly responsible for the fall in prices. If generators had been tacitly colluding before NETA, however, the impending change in market rules might have changed their behaviour a few months before the abolition of the Pool. That view implies that NETA reduced prices.