Restructuring the Electricity Market: Institutions for Network Systems

1 Public policy development for electricity restructuring emphasizes institutions for market operations in network systems. The different models present alternatives for the mix of responsibilities of the necessary system operator. Customer flexibility and choice require efficient pricing; inefficient pricing necessarily limits market flexibility. The analysis points to an integrated independent system operator, de jure on its own or de facto within a larger transmission organization, with locational marginal cost pricing rules, as the model most likely to be successful in preserving system reliability while supporting competitive markets with customer choice.