Publications

    Alexander, Barbara. “Part One: An Analysis of Residential Energy Markets in Georgia, Massachusetts, Ohio, New York and Texas.” In, 2002.Abstract

    Excerpt from the Executive Summary:

    The five state programs examined in Part One include: Georgia’s natural gas competition program at Atlanta Gas Light Co., New York’s Consolidated Edison’s electric restructuring program, Massachusetts’ electric competition program (statewide), Ohio’s electric competition program (statewide), and Texas’ electric competition program (statewide). Part One analyzes the terms of service provided to residential customers through both Default Service and the offers made by competitive suppliers; the consumer protection programs and policies adopted by each state; the extent of the development of the retail market; and the scope and type of competitive suppliers who have sought to obtain residential customers.

    Rose, Kenneth, and Venkata Bujimalla. 2002 Review of Electric Power Markets, 2002.Abstract

    Excerpt from the Executive Summary:

    News of Enron’s accounting improprieties and subsequent collapse have been part of the continued eventful last two years for the electric supply industry. Shortly after the skyrocketing prices in California and the West of 2000 and 2001 had subsided, the Enron developments began to come to light in late 2001. This has lead to investigations by several federal agencies and revelations of improper trading and reporting practices of other energy companies. As a result of this and reduced demand for electricity, the industry has been hit by a “credit crunch” as investors have become more wary and has forced many energy companies to cut back on trading activities, sell assets, and reduce future investments in order to improve their balance sheets. In the face of all the industry turmoil, while many retail markets remain relatively inactive, particularly for smaller residential customers, overall market activity has increased from last year. Wholesale markets since California settled down, continue in general to function well from an operational standpoint, however, there continues to be strong evidence that significant market power is being exercised in all markets that have been examined.

    Cooper, Mark. All Pain, No Gain: Restructuring and Deregulation in the Interstate Electricity Market. Consumer Federation of America, 2002.Abstract

    Excerpt from the Executive Summary:

     

    WHEN YOU ARE HEADED IN THE WRONG DIRECTION, GOING FASTER DOES NOT HELP

    Institutions Should Fit the Facts

    Electricity is a unique industry. It is a complex, real time network that requires cooperation and coordination to deliver a vital service. Demand for electricity is inelastic. Consumers faced with high electric prices cannot simply stop using electricity or switch to something else. Supply of electricity is also inelastic. Substantial new power plants take long lead times to construct. The transmission system cannot be expanded easily. Once produced, electricity cannot be stored very efficiently. As a result, it is deeply “affected with the public interest” and requires a balance of public and private responsibilities and incentives to keep it running smoothly. Restructuring and deregulation have undermined these values in the electricity industry. State policymakers recognized these problems and slowed down or reversed the irresponsible rush toward deregulation. Unfortunately, federal policymakers are charging ahead with deregulation policies such as the Electricity Title of the Energy Bill and the Standard Market Design proposal put forth by the Federal Energy Regulatory Commission.

    All Pain, No Gain

    States have been convinced to slow down or stop restructuring based on a mountain of evidence that restructuring and deregulation of the electricity industry offers enormous risks for consumers and virtually no rewards. Restructuring and deregulation has unleashed abuse of market power, excessive scarcity overcharges, inefficient transactions costs, and a sharp increase in the cost of capital. These cost increases swamp efficiency gains projected for deregulation.

    Brown, Matthew. Part Two: An Analysis of Opt-out Aggregation in Massachusetts and Ohio, 2002.Abstract

    Excerpt form the executive Summary:

    Half of the states in the U.S. have enacted laws to open their energy markets to competition since 1996. Yet, with only a couple of exceptions, these laws brought about the dramatic price reductions and competitive energy markets that many policymakers anticipated. Those exceptions are notable, however, and offer lessons about keeping electricity costs low while bringing the benefits of competition to a large number of small customers. Ohio and Massachusetts -- recently followed by Rhode Island -- enacted laws that allow a process known as optout aggregation. This is a public process that allows a municipality, county or other local branch of government to assemble the electric load of all or a part of the customers within its jurisdiction, and bid that load out to the best bidder. The citizens of the aggregating entity become part of the buying group unless they affirmatively “opt-out” by saying that they do not want to be part of the group. Opt-out aggregation is a low-cost way to pool the buying power of a large number of customers. Part Two of this study examined aggregation programs in Ohio and Massachusetts, which are the two states that have allowed opt-out aggregation and have programs in operation. The two case studies provide data that reflect significant savings and a high participation rate and also provide some conclusions and lessons learned.

    Fabra, Natalia, Nils-Hendrik von der Fehr, and David Harbord. “Designing Electricity Auctions: Uniform, Discriminatory and Vickrey.” In, 2002.Abstract

    Fabra, Natalia, Nils-Hendrik von der Fehr and David Harbord. Designing Electricity Auctions: Uniform, Discriminatory and Vickrey. 9 November 2002. Paper, 37 pages.

    Motivated by the new auction format introduced in the England and Wales electricity market and the recent debate in California, we charac- terize bidding behavior and market outcomes in uniform, discriminatory and Vickrey electricity auctions. The aim is to gain an improved under- standing of how different auction formats affect the degree of competition and overall welfare in decentralized electricity markets. We find that the uniform auction is (weakly) outperformed in consumer surplus terms by the discriminatory auction, but that uniform auctions are (weakly) more efficient. Vickrey auctions guarantee productive efficiency, but at the expense of large payments to firms. The overall welfare ranking of the auctions is thus ambiguous. The paper also clarifies some methodological issues in the analysis of electricity auctions. In particular we show that analogies with continuous share auctions are misplaced so long as firms are restricted to a finite number of bids. We also provide a characterization of multi-unit Vickrey auctions with reserve pricing.

     

     

    Schubert, Eric, Sam Zhou, Tony Grasso, and Grace Niu. A Primer on Wholesale Market Design, 2002.Abstract

    This white paper is a primer on wholesale market design and provides background for the open meeting workshop scheduled by the Public Utility Commission of Texas for November 1, 2002. The paper is divided into six sections:

    1. Reasons for this rulemaking;

    2. Measures of an efficient, sustainable market;

    3. Architecture of power markets;

    4. Elements of a power market;

    5. Basic economics of congestion management and day-ahead markets;

    6. Descriptions of wholesale electric markets around the world.