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Industry Structures and Market Mechanisms

Fortnightly Magazine - March 15 1995

these criteria should make it easier to choose sensibly between the PoolCo and bilateral market proposals. But first we need to know where we want to go.

Finally, two misunderstandings from the January 1 mini-forum ought to be cleared up:

1) An England and Wales type PoolCo is a monopoly, but not a large one. Far from having a giant appetite, it is mainly a data-processing business. In England and Wales, the PoolCo functions account for less than 0.5 percent of total industry costs.

2) A PoolCo does not set prices, but operates a procedure (that is, a computer program) that determines prices through the interaction of generator bids and consumer demands. This could be accomplished in other ways, although these will also need procedures, since all possible bilateral contracts cannot be honored. The system operator must have a method of allocating the resources of the transmission system between sometimes conflicting demands, and allocating the costs of network services. t

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