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Fortnightly Magazine - March 1 1998

pocket is transmission constrained. Such contract prices would likely be reasonable, since the load-pocket generators would have the freedom to be out earning their revenue in the open market, just like every other supplier. This arrangement would leave the customer no worse off than buying from the open market and paying wheeling charges to get the power to the point of consumption. In addition, load-pocket generation could be allowed to sell to marketers or aggregators within the load pocket during periods of system emergencies (i.e., during transmission line forced outages). The price for such emergency service also would fall under FERC regulation.

Critics may cite reliability issues inherent in counter-scheduling. At this point, I can only agree with them. But naysayers have always expressed such concerns in telephone, gas and early attempts at electric deregulation. Perhaps any reliability concerns can go by the wayside as did early concerns over "loop flow." One can only hope.

Free of the load pocket constraint, consumers would gain access to the competitive power markets. Free of regulation, load pocket generators would learn to enjoy the discipline of the market. The load pocket problem would be solved.

Michael Schmidt is interim director of pricing and economic analysis at Nevada Power Co. and adjunct professor at the University of Phoenix.


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