Alternative Pathway to Electricity Market Reform: A Risk-Management Approach

Abstract

An evolutionary "Third Way" approach for restructuring the electricity industry is proposed, striking a balance between the extremes of vertical integration and direct liberalization of wholesale and retail markets. This approach accepts that retail utilities will need to continue to serve a large contingent of core customers who rely on inter-temporal smoothing of retail rates. Practical aspects of implementing this role within liberalized wholesale markets are also examined.