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When Markets Fail

New England grapples with excess capacity and rock-bottom prices.

Fortnightly Magazine - May 2010

will be a two-tiered market where some new players are paid a higher price and existing suppliers are paid a lower price—but with all offering the same service.

“No one will seek to enter the market other than by such OOM agreements,” Shanker explains, as a supplier without such protection would fall prey to buyer market power. Eventually, he warns, all favored “new suppliers” will become disfavored “existing suppliers.”

But is that a problem for ratepayers?

According to NEGPA, “if this problem is not solved, load will have to support all new entry through bilateral contracts, thus taking full ownership risk, including the risk of making mistakes.”