Looking Power Market Realities in the Face

Abstract

The current semi-deregulated market structure of the electric utility industry does not appear to be a stable one. Taking into account what is happening in the financial mar-kets, regulatory incentives to preserve market operations until excess generation sur-pluses are absorbed may be appropriate. It is time for Washington policymakers to look reality in the face and consider radical, new, industry-encompassing approaches. Those approaches might include accepting the fact that there are excess reserve margins to be worked off over several years, freezing movement of generating assets from the unregulated to the regulated sector, proceeding with efforts to establish workable competitive markets without native load preference through standard market design (SMD), providing some incentive return to parent holders of independent generation assets frozen in the competitive sector, and affording merchant plants not owned by utility affiliates some parallel rate relief.