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The Fallacy of High Prices

We are better off under restructured electric markets.

Fortnightly Magazine - November 2006

was 0.45 percent for the pre-restructured period, 1996-2000, and 0.32 percent for the structured period 2000-2005.

7. Note that the natural-gas prices spiked following hurricanes Rita and Katrina at the end of 2005, with the average city gate price for October 2005 reaching above $12/MMBtu.

8. The coal-price series represents a national average including long-term contract prices. Spot prices have risen to a much greater extent than indicated. The spot price for Central Appalachian coal was above $60/ton, or $2.40/MMBtu, for most of 2005.

9. Electricity and Underlying Fuel Costs, Analysis Group, 2006.

10. Alabama, Georgia, Louisiana, Mississippi and South Carolina.

11. Delaware, Maryland, New Jersey and Pennsylvania.

12. Analysis based on EIA data.

13. While far from perfect, the best institutional arrangement devised to date to facilitate the development of electricity markets is the ISO/RTO framework, of which PJM arguably has been one of the best examples. It is thus all the more surprising—and rather alarming—to hear policymakers within PJM itself increasingly expressing opposition to electricity restructuring and competitive electric markets.

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