FEASIBILITY OF THE LIBERAL ELECTRICITY MARKET UNDER CONDITIONS OF A SMALL AND IMPERFECT MARKET. THE CASE OF LITHUANIA

At the end of the 20(th) century most governments of the world started adopting guidelines on the electricity market liberalization, and the liberal electricity market already operates in USA, Scandinavia and some EU Member States. In most cases the deregulated market has lived up to expectations but there were situations when priority was again given to the regulated market. The aim of this article is to assess whether the deregulated electricity market is a good choice for the countries with a small and imperfect market. Electricity is completely homogenous and it might not be warehoused and its price depends on the fuel used, so the examples of other economic sectors (natural gas, water, telecommunications, etc.) sometimes cannot be applied for this market.. This paper analyses the advantages and disadvantages and the potential threats of the deregulated electricity market; moreover, the paper presents the main principles lying behind the electricity price setting and analyses whether the deregulated electricity market fits for Lithuania.