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Price Spike Reality: Debunking the Myth of Failed Markets

The data is in. Market power fails as an explanatory variable for episodes of high prices.
Fortnightly Magazine - November 1 2000

the future? More construction, more demand growth, commodity cycles, and, on average, some spiking. That, of course, assumes the market will not be re-regulated to a major extent. It's a fair assumption; I believe cooler heads will prevail, even during the summer.

1 That has led to the following aphorism, which has a kernel of truth but also shows how markets can overcome problems: "Imagine every state having its own Federal Aviation Administration, the Securities and Exchange Commission being run by the industry on a voluntary basis, and the Food and Drug Administration saying it might be in charge, but it's not sure."

2 Rose, Judah, "Last Summer's 'Pure' Capacity Prices: A Harbinger of Things to Come," Public Utilities Fortnightly, Dec. 1, 1997, as well as Judah Rose and Charles Mann, "Unbundling the Electric Capacity Price in a Deregulated Commodity Market," Public Utilities Fortnightly, Dec. 1, 1995. "Analyst Sees Skyrocketing Peak Prices as Supply, Demand Approach a Balance," Power Markets Week, Jan. 26, 1998.

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