Robert Blohm and Professor William Hogan recently traded op-ed letters in the Wall Street Journal on the "poolco" and "bilateral" models for wholesale power markets:
Writing first, Blohm (an advisor to Ontario's Macdonald Committee on electric competition) praised bilateral trading (individual buyers and sellers agree on price). He criticized the poolco idea of allowing some sellers "to pocket a surplus" by collecting the highest price of any block of power dispatched by the pool, regardless of the seller's costs.
He also predicted that poolcos would end up imposing monopoly-type regulation to plug what he saw as leaks in a well-functioning market:
"To prevent buyers from seeking a lower price on a competing type of trading exchange, the single-price poolco exchange would need some compensating advantage, bringing it closer to the monopoly it enjoyed prior to deregulation."
(em Robert Blohm,
"Don't Give Utilities a Monopoly on Power,"
WSJ, Mar. 11, 1997, p. A23.
William Hogan (professor of public policy and management, JFK School of Government, Harvard University), a long-time poolco proponent, saw no windfall for sellers. He defended the poolco model to ensure reliability, suggesting that a pure bilateral model would ignore the unavoidable cost of physical dispatch and operating the transmission grid: