The Visible Hand in Electricity: Using a Pool to Expand Customer Choice

Abstract:

Introduction. The United States is wasting time and effort in a confused debate over the role of an Independent System Operator (ISO) in a pool-based system for introducing competition in the electric sector. Everyone wants to allow for bilateral transactions between generators, marketers and final customers. The pooling approach allows for customer and generator bids to be cleared through a coordinated spot market administered by the ISO. Despite much high rhetoric to the contrary, the two objectives are not necessarily mutually exclusive, or even in conflict. An attractive option is to embrace both, and give market participants the maximum set of choices. The real issue, much obscured by the labels, is the extent to which the market will be efficient, non-discriminatory and open to all. The underlying technical problem is the coordination of short-term network interactions and treatment of transmission congestion.

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