Restructured Electric Power Systems: Operation, Trading, and Volatility [Book Review]

Abstract

The electric power industry is in the midst of a major restructuring in which electric energy would be traded as a commodity, electric power markets would foster open access to all suppliers of electric power, discrimination against any user of the transmission system would be reduced or eliminated, a competitive wholesale market at the national level would be fostered to reduce prices, and a competitive retail market at the state level would be encouraged to provide customer choice and competition in service and reliability. Ultimately, small customers will be able to choose their electric supplier much as they currently select their long-distance telephone carrier. For decades the electric utilities monopolized the way power was generated, transmitted, and distributed to customers in their service territories. Utilities were vertically integrated and provided generation, transmitted power in bulk from generating stations to load centers, and distributed power to customers. Although these three components remained the same, where restructuring brought on by deregulation has occurred, the three services were unbundled. Furthermore, coordination and rules were established to guarantee competition and nondiscriminatory open access to all users in the interconnection. These changes were brought about by a series of FERC Orders that progressively changed the environment in response to how the industry responded and how FERC felt it measured up to its objectives for a competitive, efficient marketplace. The energy shortages and rolling blackouts in California and elsewhere suggest that the evolution from a monopolistic to a competitive marketplace has not always been smooth. Restructured Electric Power Systems: Operation, Trading, and Volatility provides the reader with information without taking any position for or against any of these FERC Orders. It provides rational pro and con arguments made as these FERC Orders were discussed prior to implementation and the reasons that FERC gave for issuing the orders in their final form. The authors provide unbiased reporting of background information. Fortunately for the reader, they selected a self-consistent set of topics that could be covered in a book about operation under a restructured electric power system environment. The book covers the following developments: A competitive marketplace needed new trading-based methods for scheduling which generators and services would be provided for whom and by whom. This was carried out in detail for various restructured systems. A second level of concern existed, regarding what level of generation and what level of service each of the scheduled generators and control devices would provide based on the marketplace trading. This was also carried out for several restructured systems. The transactions and limitations of the trading marketplace-based operation process must be transparent in order to bolster customer and supplier confidence. Thus, the Open Access Same-Time Information System (OASIS), a reporting process and system, was implemented. A discussion of OASIS, the information it provides, and how it is determined is given Energy shortages or congestion in the interconnection that restrict the flow of power are two of the many previously unknown risks that can cause market volatility in a monopolistic environment. Market-based vehicles were needed and created to reduce and manage each of the risks identified. The risks and the various vehicles created to manage each risk are discussed. A comparison of the marketbased operating structures for various regions of the United States is provided, and a comparison of restructuring in several foreign countries is given in