Summary of "Competitive Markets for Electricity Generation" by John Moorhouse

This paper discusses how market competition in electric power generation can replace regulation or state ownership. It showed how competitive markets could improve the generation capability of a country using the US and parts of Europe as an example. The US practiced deregulation while some parts of Europe went through the path of partial reform. The paper indicated that, the British and American reforms arose in part because of two fundamental ideas which have been successfully challenged during the last two decades. The first idea was that the electricity is a natural monopoly and the second one was, independent but complementary, idea, particularly influential in Europe, is that generation, transmission, and distribution of electricity raise purely technical problems to be solved by engineers. Under both the natural monopoly and technological efficiency, it proved how wrong they both were and with both of them not having to rely on a single medium but several other factors. The paper then discussed Competitive Generation in full, starting from the elements of reform which were (i) private ownership of electricity industry facilities (ii) open access for generators to transmission facilities (iii) a minimum of three independently owned generating stations that could potentially compete for consumers with each regional electricity market or service area and (iv) separation of generation from transmission and distribution. This was discussed in relation to several countries like the US etc. The next that was talked about was the Advantages of Competitive Generation, this stated how large industrial customers would be satisfied as well as the residential customers, it explained the peak periods, the off-peak periods to the daily to seasonal periods as well. The 1st major advantage it indicated was "cost saving", then the second advantage was that "a spot market market will develop". The third advantage was "the market would provide an array of service standards that more closely match the mosaic of consumer preferences and the fourth advantage was "innovation". All these advantages were fully explained. The next chapter discussed was Competitive pricing of Electricity. This was explained with sub-chapters like the industrial customers, residential customers, distribution companies and transmission services. Before the conclusion, the market response to risk was talked about with relation to competitive generation as oppose to state ownership. Case of who carried the risk in electricity generation, how the risk was taken care of and why the risk had to be taken care of were all discussed.