Economic-efficiency considerations in restructuring electric markets

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In response to the Energy Policy Act of 1992 and the Federal Energy Regulatory Commission`s subsequent rulemaking on transmission access, many states are exploring options to restructure their electric industries. In their deliberations on restructuring, policymakers should consider (1) the reliability of the electric system; (2) income-distribution effects on ratepayers and utilities; (3) social consequences such as effects on energy conservation, renewable energy, and the environment; and (4) economic efficiency. We address economic-efficiency considerations in this study. Economic efficiency is important because it is one of the primary reasons that policymakers should consider restructuring in the first place: improving the ... continued below

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81 p.

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Hill, L.J. December 1, 1996.

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Description

In response to the Energy Policy Act of 1992 and the Federal Energy Regulatory Commission`s subsequent rulemaking on transmission access, many states are exploring options to restructure their electric industries. In their deliberations on restructuring, policymakers should consider (1) the reliability of the electric system; (2) income-distribution effects on ratepayers and utilities; (3) social consequences such as effects on energy conservation, renewable energy, and the environment; and (4) economic efficiency. We address economic-efficiency considerations in this study. Economic efficiency is important because it is one of the primary reasons that policymakers should consider restructuring in the first place: improving the electric-industry`s efficiency lowers costs and, hence, electric prices. In this study, we look at the sources of (in)efficiency in existing and proposed electric markets with the objective of guiding policymakers to design efficient electric markets. The advantages of a competitive market are well known: it leads to lower costs for the utility, lower prices for consumers, more product choices, better customer service, and often the need for less regulation by federal and state agencies. In the short run, firms who cannot produce at the market-clearing price are forced to leave the industry, ensuring that customers have the lowest price possible. In the long run, competition promotes innovation and lower costs. The physical and institutional characteristics of the U.S. electric industry, however, could be impediments to attaining efficiently run, competitive markets. Because of these characteristics, there are multiple sources of efficiencies and inefficiencies in existing electric markets, and there will be multiple sources in restructured ones. The objective of policymakers should not be to trade one set of inefficiencies in existing electric markets for another set in restructured markets.

Physical Description

81 p.

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INIS; OSTI as DE97051262

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  • Other Information: PBD: Dec 1996

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  • Other: DE97051262
  • Report No.: ORNL/CON--436
  • Grant Number: AC05-96OR22464
  • DOI: 10.2172/454007 | External Link
  • Office of Scientific & Technical Information Report Number: 454007
  • Archival Resource Key: ark:/67531/metadc676045

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Office of Scientific & Technical Information Technical Reports

Reports, articles and other documents harvested from the Office of Scientific and Technical Information.

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  • December 1, 1996

Added to The UNT Digital Library

  • July 25, 2015, 2:21 a.m.

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  • Jan. 21, 2016, 8:04 p.m.

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Hill, L.J. Economic-efficiency considerations in restructuring electric markets, report, December 1, 1996; Tennessee. (digital.library.unt.edu/ark:/67531/metadc676045/: accessed April 20, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.