Abstract
The price of the products in a regulated market serves a subordinate function, as long as regulators find that total revenue will cover all costs and return earned will attract needed capital. Pricing in a competitive market, however, serves the function of bringing about the efficient allocation of economic resources. The mixed competitive-regulated pricing scheme contemplated for the restructured electricity market may neither efficiently allocate resources nor attract needed capital to certain segments of the market. Furthermore, regulators who do not appreciate the value of market signals and system operators who downplay the commercial consequences of reliability decisions may demand a command-and-control overlay that could inhibit development of an economically efficient market.
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References
James C. Bonbright, Principles of Public Utility Rates, New York, Columbia University Press, 1961, p. 44.
Bonbright, op. cit., p. 53.
Ibid., p. 53.
Leonard S. Hyman, America’s Electric Utilities: Past, Present and Future (Arlington, Virginia: Public Utilities Reports, 1997).
The concept may have heen first described in Fred C. Schweppe, “Power systems ‘2000’: hierarchical control strategies”, IEEE spectrum, July 1978, although that article does not use the term “homeostatic.”
The Oxford Dictionary and Thesaurus defines “homeostasis” as “the tendency toward a relatively stable equilibrium between interdependent elements.”
North American Electric Reliability Council Electric Reliability Panel, Reliable Power: Renewing the North American Electric Reliability Oversight System, Final Pre-publication Copy, December 22, 1997, pp. 34–35.
Marija Ilic and Leonard Hyman, “Getting It Right the First Time: The Value of Transmission and High Technologies”, The Electricity Journal, Vol. 9, No. 9, November 1996, p. 9.
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© 2000 Springer Science+Business Media New York
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Hyman, L. (2000). The Role Of Price In The Restructured Electricity Market. In: Faruqui, A., Eakin, K. (eds) Pricing in Competitive Electricity Markets. Topics in Regulatory Economics and Policy Series, vol 36. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-4529-3_3
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DOI: https://doi.org/10.1007/978-1-4615-4529-3_3
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