Publications

    of Service, New York State Department Public. “Staff Report on the State of Competitive Energy Markets: Progress To Date and Future Opportunities.” In, 2006.Abstract

    The restructuring of the energy industry from regulated vertically-integrated monopolies to competitive markets has been described as "one of the largest single industrial reorganizations in the history of the world." With 9.4 million residential and 1.2 million business electric and natural gas accounts able to choose among a number of energy providers, New York State is recognized as a leader in this area. New York has adopted a flexible approach which has allowed policies to be guided and shaped by the successes and challenges experienced in this and other states, and by continuously evolving market conditions.

    This approach has required an ongoing appraisal of the status of New York's markets and the identification of further steps to be taken to promote the long-range vision adopted by the New York State Public Service Commission (NYPSC or the Commission). As a part of that ongoing effort, this report assesses the current state of New York's wholesale electric markets and retail electric and gas markets, describes progress that has been made over the past several years in creating such markets, and identifies opportunities for continued progress toward robust competition in New York State's energy industry.

    Joskow, Paul, and Jean Tirole. “Retail Electricity Competition.” In, 2005. Publisher's VersionAbstract

    We analyze a number of unstudied aspects of retail electricity competition. We first explore the implications of load profiling of consumers whose traditional meters do not allow for measurement of their real time consumption, when consumers are homogeneous up to a scaling factor. In general, the combination of retail competition and load profiling does not yield the second best prices given the non price responsiveness of consumers. Specifically, the competitive equilibrium does not support the Ramsey two-part tariff. By contrast, when consumers have real time meters and are billed based on real time prices and consumption, retail competition yields the Ramsey prices even when consumers can only partially respond to variations in real time prices. More complex consumer heterogeneity does not lead to adverse se1ection and competitive screening behavior unless consumers have real time meters and are not rational. We then examine the incentives competitive retailers have to install one of two types of advanced metering equipment. Competing retailers overinvest in real time meters compared to the Ramsey optimum, but the investment incentives are constrained optimal given load-profiling and retail competition. Finally, we consider the effects of physical limitations on the ability of system operators to cut off individual customers. Competing retailers have no incentive to determine the aggregate value of non-interruption of consumers in the zones they serve, preferring instead to free ride on other retailers serving consumers in the same zones. 

     

    Committee, The Belmont Electricity Supply Study. “Retail Choice Study. Issues and Options for Electric Generation Service: A Report for Public Comment.” In, 2004.Abstract

    Excerpt from the Extecutive Summary:

    The Committee presents this study to the community for consideration and comment. The attached report and associated appendices and reference materials provide additional information and context. These materials are available at Belmont Municipal Lighting Department's (“BMLD”) offices, on BMLD’s web site, at the Town Clerk’s Office, and at the Belmont Library. The Committee invites any and all comments and specifically seeks input and comment on the following questions for its consideration in forming recommendations.

    1. Should the Town of Belmont pursue retail choice?

    2. If Belmont does pursue a retail choice approach, what benefits to the Town or consumers in the Town are most important to obtain in a retail choice program?

    3. If Belmont does pursue a retail choice approach, what timeframe should be considered?

    4. If Belmont does pursue a retail choice approach, what approach should be pursued?

    5. If Belmont does not pursue a retail choice approach, are there alternative power supply approaches or services, to be provided by BMLD, that are of interest?

    of PIRGs, National Association State. “Toward a Consumer-Oriented Electric System: Assuring Affordability, Reliability, Accountability and Balance After a Decade of Restructuring.” In, 2004. Publisher's VersionAbstract

    Excerpt from the Executive Summary:

    In this paper, we present a consumers-eye view of the current regulatory structure of the electric in- dustry, the experience of the past decade of restructuring, and the critical prob- lems facing the industry today. We also propose a series of guiding principles and policy options for protecting the in- terests of electricity consumers, and map out a long-term vision in which a shift to a more balanced mix of cleaner en- ergy options leads to long-term cost sav- ings for consumers.

    Bessembinder, Hendrik, and Michael Lemmon. “Gains From Trade Under Uncertainty: The Case of Electric Power Markets.” In, 2004.Abstract

    The rapid growth in energy trading and movement towards deregulation of electricity markets have come to a halt in the wake of assertions that western U.S. energy markets were manipulated. This paper refocuses attention on the potential efficiency gains from competitive wholesale power trading, showing that for any given level of average demand, retail electricity prices will be lower if electricity is traded in competitive wholesale markets than if electricity is delivered by integrated producer-retailers. Wholesale power trading allows for the diversification of demand risk, and the greatest efficiency gains accrue when power demand is least correlated across markets and when there is substantial geographic variation in expected demand. Simulation evidence indicates that real time power trading could reduce retail prices by conservative estimates of 3 to 4% on average in the U.S., and that the combination of forward and real time trading could reduce prices by 6 to 10% or more. This analysis indicates that economic efficiency would be best served by policy aimed at ensuring that power markets are indeed competitive, and that sufficient transmission capacity exists for profitable power trades to be completed.

    Casazza, Jack, and Frank Delea. “Understanding Electric Power Systems.” In, 2003. Publisher's VersionAbstract

    DESCRIPTION (from Wiley.com)

    The Enron scandal notwithstanding, it is important for professionals in the electric power industry and related positions gain a solid understanding of electric power systems and how they work. Written by two veteran power company managers and respected experts, this is a real-world view of electric power systems, how they operate, how the organizations are structured, and how electricity is regulated and priced. 

    A comprehensive overview of the electric power industry from the inside
    Covers electric power system components, electricity consumption, generation, transmission, distribution, electric utility operation, electric system control, power system reliability, government regulation, utility rate making, and financial considerations.

    Includes an extensive glossary of key terms used in the U.S. and also definitions for terms used worldwide.

    on Policy, National Commission Energy. "National Commission on Energy Policy Reviving the [US] Electricity Sector". Washington, D.C. National Commission on Energy Policy, 2003.Abstract

    Excerpt from the Introduction:

    Electric-industry restructuring has derailed. The massive blackout of August 14, 2003 certainly was not needed to underscore the point, but it adds urgency to the effort to find solutions. Wholesale markets continue to evolve slowly and erratically but are impeded by state- federal conflict, regulatory and legislative uncertainty, malfeasance, poor credit and outright collapses, of which Enron is only the most notorious. FERC’s efforts to promote more efficient markets through regional transmission organizations and a wholesale market platform offer promise, but have generated confusion and opposition. In the last five years, increased generation competition has elicited more than 100,000 megawatts of gas- fired peaking and baseload capacity, which has contributed both to a period of relatively low wholesale prices in many regions and increased exposure to gas price volatility across the system. But competitors’ losses have created substantial uncertainty about how quickly and on what terms capital markets will support additional investment throughout this sector. Indeed, investment in all categories of electricity infrastructure is down significantly, in part because of surplus capacity conditions in certain regions, but also because of uncertainty concerning which entities have the responsibility for identifying and making investments in the transmission and distribution networks, and uncertainties about how the associated costs will be recovered. A challenge in reviving these capital flows is to clarify prospects for cost recovery and reward: for example, when and on what terms will distribution utilities have the ability to enter into long-term contracts with generation service providers; how will distribution utility responsibilities interact with the opportunities created for competitive retail suppliers in states with retail competition; who has the responsibility for identifying needed enhancements to the transmission network; how will they be paid for securing them; and who will pay? The August 2003 blackout is a reminder of how much hinges on finding practical answers promptly.

    et. al. Steinhurst, William, [Connecticut] Office of Consumer Counsel Comments on Alternative Transitional Standard Offers, 2003.Abstract

    Excerpt from the Executive Summary:

    The Department of Public Utility Control should require the electric distribution companies to procure a variety of Alternative Transitional Standard Offers that will promote the generation of electricity through renewable sources or the efficient use of energy resources in Connecticut. Such alternative Offers have significant potential to improve market stability and efficiency for all customers, to ameliorate environmental impacts of many kinds by reducing the combustion of fossil fuels, and to eventually reduce customer bills.

    Rose, Kenneth. 2003 Performance Review of Electric Power Markets. Virginia State Corporation Commission, 2003.Abstract

    Excerpt from the Executive Summary:

    Overall, the electric supply industry’s struggles continue for a third year. The string of events began with the price run-ups in California and the West in 2000 and 2001, continued with Enron’s disclosures and collapse in late 2001, was followed by disclosures of accounting improprieties and data misreporting, and has continued with the “credit crunch” the industry still faces. As if this was not enough to contend with, as this report was being finalized, the most widespread electrical blackout in North American history occurred. While the cause has not been determined at this time, it has already sparked a debate about possible causes and solutions and has renewed interest in federal energy legislation that was already under consideration by the U.S. Congress.

    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.

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