As the debate over restructuring the U.S. electricity industry moves forward, there comes a host of new theoretical models. Two proposals in particular serve well to frame the debate.
New England Power Pool: A Bridge to Competition
also acquire enough resources, either via bilateral contractual arrangements or through their own facilities, to meet their capability responsibility and energy needs. Market participants could also serve as load and supply aggregators. In fact, the NEPOOL mechanism of requiring independent supply procurement and charging its members their own replacement cost, should they require energy from the pool, disciplines market participants: They may end up buying energy at their selling price,3 depending on actual load conditions.
As is the rest of the country, so the New England states are debating the public policy issues on various forms of industry restructuring. These policy issues will take time to sort out. Meanwhile, NEPOOL will enable wholesale competition to move forward. With some enhancements, the NEPOOL structure can provide the bridge between now and an even more competitive environment. t
Gunnar Jorgensen is manager of wholesale market development at Northeast Utilities Service Co. Frank Felder is a consultant with The Economics Resource Group, Inc., a consulting firm based in Cambridge, MA.
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