In recent years, there has been a lot of attention devoted to discussing, debating, and analyzing alternative market organizations for the electric power industry. Typically the focus is on alternative forms of regulation or deregulation. Recent examples of this activity include the OTA report on transmission, Wheeling and Dealing, and the deliberations of the Keystone group.
While this work also deals with organization of the electric power industry, it has a somewhat different emphasis. Rather than focusing on the pros and cons of alternative regulatory proposals, it focuses on market behavior and the issues raised by different degrees of competition.
The purpose of this study is to examine competition in the electric power industry from an “industrial organization” point of view. The remainder of the report is organized as follows: Chapter 2 describes the “industrial organization” approach used to analyze the electric power market. Industrial organization emphasizes specific market performance criteria, and the impact of market structure and behavior on performance. Chapter 3 identifies the participants in the electric power market, grouped primarily into regulated producers, unregulated producers, and consumers. Chapter 4 describes the varieties of electric power competition, organized along two dimensions: producer competition and consumer competition. Chapters 5 and 6 identify the issues raised by competition along the two dimensions. These issues include efficiency, equity, quality, and stability. Chapters 7 through 9 describe market structure, behavior and performance in three competitive scenarios: minimum competition, maximum competition, and moderate competition. Market structure, behavior and performance are discussed, and the issues raised in Chapters 5 and 6 are discussed in detail. Chapter 10 provides conclusions about “winners and losers” and identifies issues that require further study.