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CEIC-07-07

"Deregulation/Restructuring, Where Should We Go from Here?"
Lester Lave, Jay Apt, and Seth Blumsack

Abstract:
Electricity market restructuring is widely seen as having failed. Many of the same groups who pressed for deregulation now find themselves seeking re-regulation. But re-regulation will reintroduce the flaws and problems that led people to seek deregulation; in addition, re-regulation will introduce the additional problem of how to value competitive market assets for inclusion in the regulated rate base. We reject calls for re-regulation. Our alternative is to solicit offers for long-term contracts that specify fixed and generating prices for each plant. The contracts would specify the number of times a generator could be asked to shut down, as well as the availability and reliability of the unit. Units whose offers are accepted would be paid their fixed offer if they complied with the terms of the contract and their generation offer for each MWh they were asked to supply.

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