Ruff - Competitive Electricity Markets: Why They Are...

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Unformatted text preview: Competitive Electricity Markets: Why They Are Working And How To Improve Them Larry E. Ruff n/e/r/a 12 May 1999 Competitive Electricity Markets Table of Contents 1. INTRODUCTION ....................................................................................................... 1 1.1 THE BASIC MESSAGE...........................................................................................................................1 1.2 THE BASIC LOGIC................................................................................................................................2 1.3 THE CURRENT SITUATION WORLDWIDE ...............................................................................................3 1.4 THE DIRECTION OF CHANGE ..............................................................................................................4 2. MARKET PRINCIPLES APPLIED TO ELECTRICITY .................................... 6 2.1 REQUIREMENTS FOR MARKET EFFICIENCY .........................................................................................6 2.1.1 A Supportive Political/Legal/Social Framework .........................................................................6 2.1.2 An Infrastructure of Monopoly or Non-Market Facilities............................................................6 2.1.3 Well-Defined and Enforceable Property Rights ..........................................................................6 2.1.4 Practical Ways To Trade Rights and/or Price Interactions .........................................................7 2.2 THE FUNDAMENTAL TRADE-OFFS IN MARKET DESIGN......................................................................7 2.3 WHY COMPETITION CAME LATE TO ELECTRICITY.............................................................................8 2.4 THE BREAKTHROUGH : ISOS, SPOT MARKETS AND FINANCIAL CONTRACTS ...................................9 3. ALTERNATIVES FOR CONTRACTING AND REAL-TIME TRADING...... 12 3.1 “PHYSICAL” VERSUS “FINANCIAL” CONTRACTS .................................................................................12 3.1.1 Ownership or Title...................................................................................................................12 3.1.2 Commercial Terms...................................................................................................................13 3.1.3 Insulation from the Spot Price, or Trading Outside the Pool .....................................................13 3.1.4 Contracts for Non-Energy Physical Services or “Green” Energy .............................................14 3.2 THE CRITICAL ISSUE: SHORT-TERM TRADING ARRANGEMENTS .........................................................15 3.2.1 Contract Damages and Remedies.............................................................................................15 3.2.2 Expanding – and Limiting – Market Choices ...........................................................................16Choices ....
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This note was uploaded on 11/02/2011 for the course ECON 301 taught by Professor Gandhi during the Spring '01 term at Andhra University.

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Ruff - Competitive Electricity Markets: Why They Are...

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