An Analysis of Market Institutions for PowerChoice

Niagara Mohawk's PowerChoice proposal has a central goal of creating competitive markets for electric power in the near term. PowerChoice would create an Independent System Operator (ISO) to manage load and, in addition, a competitive wholesale generation market in the form of a Power Exchange. The Power Exchange would operate in a manner similar to financial markets found around the world. By divesting itself of power production Niagara Mohawk would remain a regulated entity engaged in transmission and distribution of electricity. This report provides: a description of the alternative market institutions which might be utilized by the Power Exchange, a preliminary assessment of the desirability of those institutions, an evaluation of broader aspects of deregulation and market structure, and a brief conclusion which suggests research necessary to resolve questions which remain concerning the performance of alternative institutions.