General Resources on Electricity Restructuring

Last Updated: 19 April 2008 Site maintained by: Leigh Tesfatsion Professor of Economics and Mathematics Iowa State University Ames, Iowa 50011-1070 http://www.econ.iastate.edu/tesfatsi/ tesfatsi AT iastate.edu Electricity Market Open-Source Software Agent-Based Electricity Research

Table of Contents

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• Introduction
• Basic Background Readings
• The Electricity Industry
• Agent-Based Computational Economics (ACE)
• Auction Mechanisms (Pricing Protocols)
• Game Theory (Pricing and Trading Strategies)
• Learning and the Evolution of Behavioral Rules
• Network Economics
• Software Resources
• Case Study Resources
  • General Regulatory Policy
  • Multiple Case Study Coverage
  • Australia
  • California (U.S.A.)
  • Midwest (U.S.A.)
  • New England Area (U.S.A.)
  • New Zealand
  • Pennsylvania-New Jersey-Maryland (PJM)
  • Spain
  • United Kingdom
  • Other Case Study Resources
• Acknowledgements

Introduction

The U.S. electricity industry is currently undergoing substantial changes in both its structure (ownership and technology aspects) and its architecture (operational and oversight aspects). These changes involve attempts to move the industry away from highly regulated markets with administered cost-based pricing and towards competitive markets in which prices more fully reflect supply and demand forces. The goal of these changes is to provide industry participants with better incentives to control costs and introduce innovations. The process of enacting and implementing policies and laws to bring about these changes has come to be known as restructuring.

This restructuring process has been controversial. The meltdown in the restructured California wholesale power market in the summer of 2000 has shown what can happen when a poorly designed market mechanism is implemented without proper testing. Following the California crisis, many energy researchers have eloquently argued the need to combine sound physical understanding of electric power and transmission grid operation with economic analysis of incentives in order to develop electricity markets with good real-world performance characteristics.

The goal of this resource site on restructured electricity systems is to encourage the study of these systems from a perspective that adequately addresses both economic and engineering concerns. Particular attention is paid to new agent-based computational modeling tools that permit restructured electricity systems to be modeled as commercial networks of strategically interacting traders and regulatory agencies learning to operate through time over realistically rendered transmission grids. A more specialized collection of resources related specifically to agent-based computational electricity research is also available.

For each topic area below, authored readings are listed first, followed by pointers to general resource websites for the area (if any). The topic coverage of all of these listings appears to be highly relevant for the study of restructured electricity markets, but not all listings have been carefully checked out at this point. Comments concerning their suitability are most welcome and will be added as annotations to the listings.

Basic Background Readings

• FERC, "Report to Congress on Competition in the Wholesale and Retail Markets for Electric Energy (pdf,961K), U.S. Federal Energy Regulatory Commission, Released June 5, 2006. See, also, the comment on this report released on 6/26/06 by Lynne Kiesling and Michael Giberson (Mercatus Center, George Mason University).
  Abstract: This report, required by Secton 1815 of the Energy Policy Act of 2005, provides an overview and summarizes the progress toward wholesale and retail competition over the past 25 years, the current state of wholesale and retail competition in the U.S., and the economic and political issues surrounding the transition to wholesale and retail competition.

  Timothy J. Brennan, Karen L. Palmer, and Salvador A. Martinez (2002), Alternating Currents, Resources for the Future, Washington, D.C. 226 pp.

  Abstract: The authors provide an overview and analysis of the concerns facing industry regulators, legislators, and others as they consider whether, when, and how to open electricity markets to increased competition.

  Derek W. Bunn, Ed., Modeling Prices in Competitive Electricity Markets, John Wiley & Sons, Ltd, UK, 2004.

  Abstract: This compilation of chapters from international authors provides econometric analyses of whole power markets around the world. The goal is to provide greater understanding of their particular characteristics and to assess the applicability of various methods of price modeling.

  Jack Casazza and Frank Delea, Understanding Electric Power Systems: An Overview of the Technology and the Marketplace, IEEE Press/Wiley-Interscience, Piscataway, NJ, 2003.

  Abstract: "(This book) bridges the gap between technology, government policy, economics and finance, business arrangements, and the Internet - helping the reader to understand the interrelationship of the many aspects of the provision of electric power supply. ... For engineers, policymakers, and students alike, (this book) provides a high-level overview of how electric power is generated, transmitted, and controlled in the United States."

  William W. Hogan, "Market Design and Electricity Restructuring" (pdf,209K), Presentation to the Association of Power Exchanges (APEx), 2005 Annual Conference, Orlando, Florida, November 1, 2005.

  Abstract: The author reviews the tortured history of electricity restructuring in the U.S. and outlines the requirements for SMD ("Successful Market Design").

  Paul Joskow, "Markets for Power in the United States: An Interim Assessment" (pdf,5.4MB), The Energy Journal, Volume 27, Number 1, 2006, pp. 1-36.

  Abstract: "The transition to competitive wholesale and retail markets for electricity in the U.S. has been a difficult and contentious process. This paper examines the progress that has been made in the evolution of wholesale and retail electricity market institutions. Various indicia of the performance of these market institutions are presented and discussed. Significant progress has been made on the wholesale competition front but major challenges must still be contronted. The framework for supporting retail competition has been less successful, especially for small customers. Empirical evidence suggests that well-designed competitive market reforms have led to performance improvements in a number of dimensions and benefited customers through lower retail prices.

  Daniel S. Kirschen and Goran Strbac, (2004), Fundamentals of Power System Economics, Wiley, 2004, 284pp. ISBN: 0-470-84572-4.

  Abstract: Topics include: basic concepts from economics; markets for electrical energy; participating in markets for electrical energy; system security and ancillary services; transmission networks and electricity markets; investing in generation; and investing in transmission. This book is aimed at first-year graduate students and final-year undergraduate students specializing in power engineering. It includes problems and selected problem answers. The authors are both faculty members at the University of Manchester Institute of Science and Technology (UMIST), Manchester, UK.

  Andrew N. Kleit (Ed.), Electric Choices: Deregulation and the Future of Electric Power, Rowman & Littlefield Publishers, Inc., New York, 2007.

  Abstract: "The virtues of market forces can play a large role in bringing about a more efficient electricity sector. But electricity restructuring requires careful policy choices. The chapters in this volume lay out various means for reaching more competitive and better-operating electricity markets."

  Mohammad Shahidehpour, Hatim Yamin, and Zuyi Li, Market Operations in Electric Power Systems: Forecasting, Scheduling and Risk Management, IEEE Inc., New York, and John Wiley & Sons, Inc., New York, 2002.

  Abstract: Using real-world case studies, this survey offers engineers, consultants, researchers, financial managers, university professors, students, and other professionals in the industry a comprehensive review of electricity restructuring and how its radical effects will shape the market.

  Steven Stoft, Power System Economics: Designing Markets for Electricity, IEEE Press, Wiley-Interscience, 2002.

  Abstract: The author provides an introduction to the fundamental economics of market power design and analysis.

  Robert Wilson, "Architecture of Power Markets" (pdf preprint,75K), Econometrica, Volume 70, No. 4 (July, 2002), 1299-1340.

  Abstract: Liberalization of infrastructure industries presents classic economic issues about how organization and procedure affect market performance. These issues are examined in wholesale power markets. The perspective from game theory complements standard economic theory to examine effects on efficiency and incentives.

The Electricity Industry

Authored Readings:

• Fernando Alvarado (Engineering, University of Wisconsin) is interested in a variety of issues related to power system operation -- in particular, market design, security, interactions between markets and power systems, stability issues, ancillary services, congestion management, market power, application of FACTS devices, and demand management. Citations and pointers to his work can be found at his website.

• Soren Borenstein, Understanding Competitive Pricing and Market Power in Wholesale Electricity Markets, Working Paper PWP-067, August 1999, Program on Workable Energy Regulation, University of California Energy Institute, available on-line at the UCEI Home Page.

• Soren Borenstein, The Trouble With Electricity Markets (and Some Solutions), Working Paper PWP-081, January 2001, Program on Workable Energy Regulation, University of California Energy Institute, available on-line at the UCEI Home Page.

• John Bower and Derek Bunn, "A Model-Based Comparison of Pool and Bilateral Market Mechanisms for Electricity Trading" (WordDoc,155K).
  Abstract: The authors develop an agent-based computer simulation model of the wholesale electricity market in England and Wales as a means of systematically testing the potential impact of alternative trading arrangements on market prices.

  Timothy F. Bresnahan (1989), "Empirical Studies of Industries with Market Power", in Richard Schmalensee and Robert Willig, eds., Handbook of Industrial Organization, Vol. 2, New York: North Holland, pp. 1010-1057.

  Derek W. Bunn and Fernando S. Oliveira (2001), "Agent-Based Simulation: An Application to the New Electricity Trading Arrangements of England and Wales", IEEE Transactions on Evolutionary Computation, Vol. 5, No. 5, October, 493-503.

  Hung-po Chao, Stephen Peck, Shmuel Oren, and Robert Wilson (2000), "Flow-Based Transmission Rights and Congestion Management" (pdf), Electricity Journal, October.

  Consumer Energy Council of America (CECA), Positioning the Consumer for the Future: A Roadmap to an Optimal Electric Power System, April 2003, 192pp.

  Abstract: From the CECA announcement: "The CECA Roadmap provides a brief history of the regulation of the electric power industry that includes emergence of retail competition and the impact of competition on consumers. It also provides detailed appendices on advanced technologies that offer increased efficiencies for the transmission system. ... Founded in 1973, the CECA is the senior public interest organization in the U.S. focusing on energy and telecommunications policies."

  Christopher J. Day and Derek W. Bunn (1999), "Generation Asset Divestment in the England and Wales Electricity Market: A Computational Approach to Analysing Market Power" (WordDoc,509K).

  Abstract: The authors develop an approach to modeling competition between electricity generating companies based on computational modeling and simulation. In this approach, each company, or agent, is modeled with specific objectives and bounded reasoning abilities. Using the price-setting mechanism found in the England and Wales pool, the interaction of the generating companies is simulated through time.

  See, also, "Notes on Market Power and the Day/Bunn Paper (ps,134K) prepared by L. Tesfatsion (August 1999).

  Nils-Henrik M. von der Fehr (Department of Economics, University of Oslo): Regulation of utilities (electric and other); Oligopoly and other forms of market imperfection; Auctions; Competitive policy.

  Richard J. Gilbert and Edward P. Kahn, Eds. (1996), International Comparisons of Electricity Regulation, Cambridge University Press, Cambridge, UK.

  Scott M. Harvey and William Hogan (2002), "Market Power and Market Simulations", Working Paper, Center for Business and Government, John F. Kennedy School of Government, Harvard University, Cambridge, MA, July 16.

  William H. Hayt, Jr., Jack E. Kemmerly, and Steven M. Durbin, Engineering Circuit Analysis, Sixth Edition, McGraw Hill, New York, 2002.

  Abstract: The goal of this well-known textbook is to help readers develop a strong intuitive understanding of linear circuit analysis through the use of many examples and expanded explanations of important topics.

  William Hogan (2003), "Transmission Market Design", Working Paper, Center for Business and Government, John F. Kennedy School of Government, Harvard University, Cambridge, MA, April 4.

  William Hogan (2002), "Financial Transmission Right Formulations", Working Paper, Center for Business and Government, John F. Kennedy School of Government, Harvard University, Cambridge, MA, March 31.

  William Hogan (1996), "Contract Networks for Electric Power Transmission", Electricity Journal 9(9), pp. 42-55.

  Abstract: The author considers ways to encourage efficient transmission pricing. He proposes selling transmission rights at the economic value of the marginal transmission.

  S. Hunt and G. Shuttleworth, Competition and Choice in Electricity, Chichester, 1996.

  Paul L. Joskow, "The Difficult Transition to Competitive Electricity Markets in the U.S.", May 2003, Prepared for the conference "Electricity Deregulation: Where From Here?" at the Bush Presidential Conference Center, Texas A&M University, April 4, 2003. [Accessed 5/12/03 at Joskow's home page.]

  Paul L. Joskow and Nancy Rose (1989), "The Effects of Economic Regulation", Chapter 25, pp. 1449-1506 in R. Schmalensee and R. D. Willig (eds.), Handbook of Industrial Organization, Volume II, Elsevier Science Publishers.

  Paul L. Joskow (1997), "Restructuring, Competition, and Regulatory Reform in the U.S. Electricity Sector" (html), Journal of Economic Perspectives 11(3), 119-138.

  Abstract: The first half of the paper discusses the physical attributes of electric power networks, the industrial and regulatory structure that emerged during the last century to govern resource allocation in the sector, the performance attributes of the sector, and the sources of pressure for reform. The second half of the paper discusses a number of issues that must be confronted to create efficient competitive markets for generation services and to reform the regulation of the residual monopoly segments to support the efficient evolution of the competitive segments that must rely on them.

  Paul L. Joskow and Jean Tirole (2000), "Transmission Rights and Market Power on Electric Power Networks" (html), RAND Journal of Economics, Vol. 31, No. 3, pp. 450-487.

  J. J. Laffont and Jean Tirole (1993), A Theory of Incentives in Procurement and Regulation, MIT Press, Cambridge, MA.

  Abstract: Among many other topics, the authors discuss "performance based regulation" for governing residual monopoly services in partially deregulated electricity markets.

  Hongyan Li, Junjie Sun, and Leigh Tesfatsion (2008), "Dynamic LMP Response Under Alternative Price-Cap and Price-Sensitive Demand Scenarios" (pdf,465K), Proceedings, IEEE Power Engineering Society General Meetings, Carnegie-Mellon University, Pittsburgh, July 20-24, 2008.

  Abstract: This study investigates the complicated nonlinear effects of demand-bid price sensitivity and supply-offer price caps on Locational Marginal Prices (LMPs) for bulk electric power when profit-seeking generators can learn over time how to strategize their supply offers. Systematic computational experiments are conducted using AMES, an open-source agent-based test bed developed by the authors. AMES models a restructured wholesale power market operating through time over an AC transmission grid subject to line constraints, generation capacity constraints, and strategic trader behaviors.

  David M. Newbery (1999), Privatization, Restructuring, and Regulation of Network Utilities, MIT Press, Cambridge, MA.

  James Nicolaisen, Valentin Petrov, and Leigh Tesfatsion (2001), "Market Power and Efficiency in a Computational Electricity Market with Discriminatory Double-Auction Pricing" (pdf,367K), IEEE Transactions on Evolutionary Computation, Vol. 5, No. 5, October, pp. 504-523. [ (pdf preprint with colored figures,162K), (pdf presentation,116K)].

  Abstract: This study reports experimental market power and efficiency outcomes for a computational wholesale electricity market operating in the short run under systematically varied concentration and capacity conditions. The pricing of electricity is determined by means of a clearinghouse double auction with discriminatory midpoint pricing. Buyers and sellers use a modifed Roth-Erev individual reinforcement learning algorithm to determine their price and quantity offers in each auction round. It is shown that high market efficiency is generally attained, and that market microstructure is strongly predictive for the relative market power of buyers and sellers independently of the values set for the reinforcement learning parameters. Results are briefly compared against results from an earlier electricity study in which buyers and sellers instead engage in social mimicry learning via genetic algorithms.

  Shmuel Oren, Pablo Spiller, Pravin Varaiya, and Felix Wu (1995), "Nodal Prices and Transmission Rights: A Critical Appraisal" (ps,798K), The Electricity Journal.

  Abstract: The authors argue that the pricing of transmission services and the compensation of transmission owners on the basis of nodal price differences will not produce the right incentives for transmission assets or rights in a decentralized ownership network. They assert that new methods to deal with transmission ownership compensation and expansion are needed if the move towards a competitive wholesale electricity market is not to be bogged down in a regulatory quagmire. Also available are Notes on Oren et al. (WordDoc,25K) prepared by Matthew Smith (October 1999).

  Stephen J. Rassenti, Vernon L. Smith, and Bart J. Wilson (2002), "Using Experiments to Inform the Privatization/Deregulation Movement in Electricity" (pdf,40pp), The Cato Journal 22 (3), Winter, 515-544.

  F. C. Schweppe, M. C. Caramanis, R. D. Tabors, and R. E. Robn (1998), Spot Pricing of Electricity, Kluwer Academic Publishers.

  Vernon L. Smith (1996), "Regulatory Reform in the Electric Power Industry", Regulation 1, 33-46.

  Junjie Sun (2005), "U.S. Financial Transmission Rights: Theory and Practice" (html), ISU Economics Working Paper No. 05008, March 24.

  Abstract: This paper reviews both theoretical and empirical studies of financial transmission rights (FTRs) in the major U.S. wholesale power markets. Although the current literature hold more negative views about FTRs, this paper presents a simple illustrative 2-stage model to study the competitive behaviors of electricity generators and load serving entities (LSEs) and analyzes the welfare effects of FTRs in the restructuring U.S. wholesale power market framework. The analysis focuses on a competitive two-node electricity network model where there is one generator and one LSE in each node with linear marginal cost and demand function, supervised by an independent system operator (ISO). In the first-stage of modeling, a no-rights benchmark model is developed to solve for the optimal quantity of power production and consumption and derive the locational marginal price for each node, which serve as the building blocks to solve for the optimal FTR hedge positions in the second-stage model. Once a stochastic parameter shock is introduced, the second-stage model shows that the acquisition of optimal FTRs by the risk averse generators and LSEs increases and in general strictly increases the social welfare compared with the case where there is no FTRs available. This result provides a counterexample to the somewhat negative views about FTRs held by other economists in the literature and provides some economic explanations to the fact that FTRs are widely adopted as a financial hedge instrument in the major U.S. wholesale power markets.

  Junjie Sun and Leigh Tesfatsion, "An Agent-Based Computational Laboratory for Wholesale Power Market Design" (pdf,724K), Proceedings, IEEE Power Engineering Systems General Meeting, Tampa, Florida, June 2007, to appear.

  Abstract:This proceedings paper is an abridged version of ISU Economics Working Paper No. 06025 (below). It reports on the model development and open-source implementation (in Java) of an agent-based computational wholesale power market organized in accordance with core FERC-recommended design features and operating over a realistically rendered transmission grid subject to congestion effects.

  Junjie Sun and Leigh Tesfatsion, "Dynamic Testing of Wholesale Power Market Designs: An Open-Source Agent-Based Framework" (pdf,2.2MB), Computational Economics, Vol. 30, No. 3, 2007, 291-327. A ppt presentation (7/17/06) of the research reported on in this paper can be accessed here (pdf,658K).

  Abstract: In April 2003 the U.S. Federal Energy Regulatory Commission proposed a complicated market design - the Wholesale Power Market Platform (WPMP) -- for common adoption by all U.S. wholesale power markets. Versions of the WPMP have been implemented in New England, New York, the mid-Atlantic states, the Midwest, and the Southwest, and adopted for implementation in California. Strong opposition to the WPMP persists among some industry stakeholders, however, due largely to a perceived lack of adequate performance testing. This study reports on the model development and open-source implementation (in Java) of a computational wholesale power market organized in accordance with core WPMP features and operating over a realistically rendered transmission grid subject to congestion effects. The traders within this market model are strategic profit-seeking agents whose learning behaviors are based on data from human-subject experiments. Our key experimental focus is the complex interplay among structural conditions, market protocols, and learning behaviors in relation to short-term and longer-term market performance. Findings for a dynamic 5-node transmission grid test case are presented for concrete illustration.

  Junjie Sun and Leigh Tesfatsion, "Open-Source Software for Power Industry Research, Teaching, and Training: A DC-OPF Illustration" (pdf,115K), Proceedings, IEEE Power Engineering Systems General Meeting, Tampa, Florida, June 2007, to appear.

  Abstract: This proceedings paper is an abridged version of ISU Economics Working Paper No. 06014 (below). It reports on the development and implementation of a stand-alone open-source Java solver for DC optimal power flow (DC-OPF) problems suitable for research, teaching, and training purposes. The DC-OPF solver is shown to match or exceed the accuracy of BPMPD (a proprietary third-party QP solver highly recommended by MatPower) when tested on a public repository of small to medium-sized QP problems. The capabilities of the DC-OPF solver are illustrated for a 5-node DC-OPF test case commonly used for training purposes.

  Junjie Sun and Leigh Tesfatsion, DC Optimal Power Flow Formulation and Testing Using QuadProgJ (pdf,519K), ISU Economics Working Paper No. 06014, Department of Economics, Iowa State University, Revised June 2006.

  Abstract: Nonlinear AC Optimal Power Flow (OPF) problems are commonly approximated by linearized DC OPF problems to obtain real power solutions for restructured wholesale power markets. We first present a standard DC OPF problem, which has the numerically desirable form of a strictly convex quadratic programming (SCQP) problem when voltage angles are eliminated by substitution. We next augment this standard DC OPF problem in a physically meaningful way, still retaining an SCQP form, so that solution values for voltage angles and locational marginal prices are directly obtained along with real power injections and branch flows. We then show how this augmented DC OPF problem can be solved using QuadProgJ, an open-source Java SCQP solver newly developed by the authors that implements the well-known dual active-set SCQP algorithm by Goldfarb and Idnani (1983). To demonstrate the accuracy of QuadProgJ, comparative results are reported for a well-known suite of numerical QP test cases with up to 1500 decision variables plus constraints. Detailed QuadProgJ results are also reported for 3-node and 5-node DC OPF test cases taken from power systems texts and ISO-NE/MISO/PJM training manuals.

  Gerald L. Thompson and Sten Thore (1992), Computational Economics, The Scientific Press, N.Y.

  Note: Chapters of Particular Interest are: Chapters 1-8:Linear and Nonlinear Programming Applied to Market Analysis (pp. 3-119); and Chapter 18: Energy Modeling (pp. 229-238).

  Jürgen Weiss (1997), "Market Power Issues in the Restructuring of the Electricity Industry: An Experimental Investigation", Harvard Business School, Harvard University, Cambridge, MA. Also available are "Notes on J. Weiss's `Market Power Issues...'" (html) by L. Tesfatsion.

  Abstract: The Weiss paper reports on results from a number of experiments with industry subjects conducted over the Internet that illustrate the impact of seller concentration, demand side bidding, transmission constraints, and two alternative pricing rules (nodal spot pricing and uniform pricing) on the nature of competition in a simulated market for electricity. More realistic modeling of the technological aspects of the industry reveals important additional incentives to exercise market power that are not seen in the simpler modelings underlying previous electricity industry studies.

  Paul Twomey, Richard Green, Karsten Neuhoff, and David Newbery, A Review of the Monitoring of Market Power: The Possible Roles of TSOs in Monitoring for Market Power Issues in Congested Transmission Systems (WP pdf,664K), (Slides pdf,897K), Center for Energy and Environmental Policy Research, Sloan School of Management, MIT, 05-002 WP, March 2005.

  Abstract: The paper surveys the literature and publicly available information on market power monitoring in electricity wholesale markets. After briefly reviewing definitions, strategies and methods of mitigating market power we examine the various methods of detecting market power that have been employed by academics and market monitors/regulators. These techniques include structural and behavioural indices and analysis as well as various simulation approaches. The applications of these tools range from spot market mitigation and congestion management through to long-term market design assessment and merger decisions. Various market-power monitoring units already track market behaviour and produce indices. Our survey shows that these units collect a large amount of data from various market participants and we identify the crucial role of the transmission system operators with their access to dispatch and system information. Easily accessible and comprehensive data supports effective market power monitoring and facilitates market design evaluation. The discretion required for effective market monitoring is facilitated by institutional independence.

  Steven Widergren, Junjie Sun, and Leigh Tesfatsion, Market Design Test Environments (pdf preprint,136K), Proceedings, IEEE Power Engineering Society General Meeting, Montreal, June 2006. Original Posting: 1/10/06.

  Abstract: Power industry restructuring continues to evolve at multiple levels of system operations. At the bulk electricity level, several organizations charged with regional system operation are implementing versions of a Wholesale Power Market Platform (WPMP) in response to U.S. Federal Energy Regulatory Commission initiatives. Recently the Energy Policy Act of 2005 and several regional initiatives have been pressing the integration of demand response as a resource for system operations. These policy and regulatory pressures are driving the exploration of new market designs at the wholesale and retail levels. The complex interplay among structural conditions, market protocols, and learning behaviors in relation to short-term and longer-term market performance demand a flexible computational environment where designs can be tested and sensitivities to power system and market rule changes can be explored. This paper discusses the use of agent-based computational methods for the study of electricity markets at the wholesale and retail levels, and explores distinctions in problem formulation between these levels.

  Frank A. Wolak and Robert H. Patrick (1998), "The Impact of Market Rules and Market Structure on the Price Determination Process in the England and Wales Electricity Market", Draft, Stanford University.

  Allen J. Wood and Bruce F. Wollenberg (1996), Power Generation, Operation, and Control, John Wiley & Sons, New York 1996.

  Abstract: This book offers a practical hands-on guide to theoretical developments and to the application of advanced operations research methods to realistic electric power engineering problems. The text also addresses the interaction between human and economic factors to prepare readers to make real-world decisions that go beyond the limits of mere technical calculations.

  Note: In 2000 (as ISU Master's students), James Nicolaisen, Valentin Petrov, and Chuck Richter put together a Power Point Presentation on sections of this text describing the numerical solution of unit commitment and economic dispatch problems by means of Lagrangian relations.

  Felix Wu and Pravin Varaiya (1997), "Coordinated Multilateral Trades for Electric Power" (pdf,302K), Working Paper, Department of Electrical Engineering and Computer Science, UC Berkeley, April.

  Abstract: The authors propose an operating paradigm in which the decision mechanisms regarding economics and reliability (security) of system operation are separated. Economic decisions are carried out by private multilateral trades among generators and consumers. The function of reliability is coordinated through the power system operator who provides publicly accessible data based upon which generators and consumers can determine profitable trades that meet the secure transmission loading limits.

  Felix Wu, Pravin Varaiya, Pablo Spiller, and Schmuel Oren, "Folk Theorems on Transmission Access: Proofs and Counterexamples" (ps,374K), Journal of Regulatory Economics 1995. See, also, Notes on Wu et al. (WordDoc,167K) prepared by Alexei Kroujiline (October 1999).

  Abstract: Various proposals to restructure electric power transmission systems for an open and competitive market rely on concepts such as nodal prices, congestion revenues, transmission rights, etc. Implicit assertions are made concerning the regulation of transmission access, properties of economic dispatch, and the operation of competitive power markets. In this paper the authors formulate these "folk theorems" as explicit mathematical assertions, prove the ones that are true, and present counterexamples to those that are not. In particular, the authors argue that William Hogan's concept of a contract network -- a centerpiece of his recent proposal for establishing a Poolco in the operation of a restructured electric utility that is based on nodal pricing and transmission capacity rights -- is not compatible with the promotion of economic efficiency.

  Fredrik Ygge (1998), Market-Oriented Programming and its Application to Power Load Management, Ph.D. Thesis, Department of Computer Science, Lund University.

  This entire thesis, plus additional work by Ygge (EnerSearch AG, Gothenburg, Sweden) on applying the market-oriented programming approach of Michael Wellman (see below) to power load management issues, can be accessed at Ygge's website. Especially relevant for the project are: Chapter 2: On the Foundations of Market-Oriented Programming (pp. 13-42); Chapter 9: Power Load Management Principles and Benefits (pp. 131-140); and Appendix A: Glossary (pp. 191-200).

Online Materials on the Electricity Industry:

• Leigh Tesfatsion (Economics, Iowa State University, Ames) maintains a website on the Agent-Based Computational Modeling of Restructured Electricity Markets. The site provides annotated links to readings, software, individual researchers, and research groups stressing the agent-based computational modeling of restructured electricity markets.

• The Harvard Electricity Policy Group (HEPG) at the John F. Kennedy School of Government, directed by William Hogan, provides a forum for the discussion and analysis of important policy issues related to the transition to a more competitive electricity market. Resources available at this site include research papers and a variety of links to related domestic and international websites.

• The home page for Argonne National Laboratory (ANL) provides pointers to work on agent-based electricity modeling being carried out at the ANL. Also provided are electronic versions of the proceedings from agent-based modeling workshops held in 1999 and 2000, jointly hosted by ANL and the University of Chicago, that feature agent-based electricity modeling papers by Derek Bunn, John Bower, Lefteri Tsoukalas, and Michael North.

• The Pacific Northwest National Laboratory (PNNL) maintains a site titled the Federal Energy Management Program (FEMP). The goal of the site is to provide ready access to information about utility management for both electricity and natural gas. The site features both current news items (e.g., state-by-state restructuring status reports) and background information.

• Raimo P. Hämäläinen and Pierre-Olivier Pineau (Systems Analysis Lab, Helsinki University) maintain a website on Deregulated Electricity Markets that they developed for a seminar they taught in Spring 1999, with a stress on Finland's restructuring efforts. This excellent site contains downloadable (pdf) slide presentations and recommended readings on the following electricity restructuring issues covered in the seminar: introductory surveys; optimal spot pricing; spot market models; transmission pricing; regional models (game aspects); financial tools; auction mechanisms; hydro reservoir management; customers behavior and pricing; and the on-line testing of an Internet based "PowerWeb" platform for auction simulation.

• Nicholas Economides (New York University, N.Y.) maintains an Electricity -- Economics of Networks website that provides pointers to research groups and commercial sites related to electricity.

• Steven Stoft (Electricity Consultant) maintains a website on Electricity Restructuring Links. Pointers are provided to authors, topics, journals, non-profit markets, for-profit markets, associations, and historical information.

• Robert Wilson (Graduate School of Business, Stanford University, California) maintains a website of readings for a class on Mechanism Design which includes materials on the design of restructured electricity markets.

• Raimo P. Hämäläinen, et al. (Helsinki University, Finland) also maintain a Resource Site on Energy, Resources, and Environment that includes abstracts and citations for their papers on the following topics: dynamic pricing of electricity (development of a decision support system for consumers based on real-world natural and experimental data); agent-based simulation of artificial electricity markets (development of prototype software called Power Agents); short-term load forecasting and load models (with computer implementation) ; contracting for multi-period electricity exchange (development of computational solution method); natural resource problems (dynamic game theory models); and pollution and environmental problems (two- and three-country transboundary air pollution models in a game theory setting, based on real-world emission reduction agreements among Finland, Russia, and Estonia).

• The U.S. Department of Energy (DOE) maintains a site titled Electricity Restructuring that provides an overview of electricity restructuring in the U.S., a description of DOE's Electricity Restructuring Program, and information about grants awarded to further the goals of the program.

• Created by U.S. electric utilities in 1973, the Electric Power Research Institute (EPRI) is a large research consortium linked to a global network of technical specialists and EPRI scientists and engineers. The goal of EPRI is to develop the science and technology to make the generation, delivery, and use of electricity affordable, efficient, and environmentally sound. Resources available at the site include links to a variety of EPRI-sponsored research groups involved in electricity restructuring issues.

• The Energy Information Administration (EIA) (U.S. Department of Energy, Washington, D.C.) provides a wide variety of resources related to electricity and other fuel sources. For example, EIA staff researchers have prepared a detailed report titled "The Changing Structure of the Electric Power Industry 2000: An Update" (html) (DOE/EIA-0562(00), October 2000) which is freely available either in pdf format (1.69MB) or in html.

• The IEEE Power Engineering Society maintains a variety of links to resources on electric power as well as publishing the IEEE Transactions on Power Systems.

• The International Association for Energy Economics (IAEE), founded in 1977, provides a forum for the exchange of ideas, experience, and issues among professionals interested in energy economics. As part of its varied activities, the IAEE sponsors the publication of The Energy Journal.

• The home page of the OM Group. The mission of the OM Group is "to develop solutions for people active in trading in the financial and energy markets. In other words, what we sell is not our products but our considerable expertise in building everything from trading floor systems to smaller process systems." Available at this site, in particular, are descriptions of the products and services offered for restructured electricity markets.

• Resources for the Future (RFF) provides pointers to a wide variety of research articles and working papers on electricity restructuring by RFF researchers. Issues addressed include environmental protection, stranded costs, demand-side management, externality estimates, and political economy aspects.

• The University of California Energy Institute (UCEI) at UC Berkeley maintains a list of downloadable working papers on the electricity industry available through the Center for the Study of Energy Markets (CSEM). The UCEI also maintains a list of energy research organizations and information services.

• The Distributed Energy Forum is an Internet service for information on distributed energy for homeowners, businesses, utilities, institutions, and governments. The forum is a service of the Consumer Energy Council of America (CECA), a U.S. public interest organization focusing on energy and telecommunications policies.

• The Energy Journal

• Journal of Regulatory Economics, published by Kluwer Academic Publishers.

Agent-Based Computational Economics (ACE)

Authored Readings:

• Joshua M. Epstein and Robert Axtell (1996), Growing Artificial Societies: Social Science from the Bottom Up, MIT Press/Brookings, Cambridge, MA. A review (ps,28K) of this book by L. Tesfatsion appeared in the March 1998 issue of the Journal of Economic Literature.

• Leigh Tesfatsion (2001), "Agent-Based Computational Economics: A Brief Guide to the Literature" (ps, 81K). The final published version appears as an entry in Reader's Guide to the Social Sciences, Fitzroy-Dearborn, London, UK, March 2001.

• Leigh Tesfatsion (2002), "Agent-Based Computational Economics: Growing Economies from the Bottom Up" Artificial Life, Volume 8, Number 1, 55-82, published by the MIT Press (pdf preprint,216K).
  Abstract: This study outlines the main objectives and defining characteristics of agent-based computational economics (ACE), and discusses similarities and distinctions between ACE and artificial life research. Eight ACE research areas are identified, and a number of publications in each area are highlighted for concrete illustration. Open questions and directions for future ACE research are also considered. The study concludes with a discussion of the potential benefits of the ACE approach, as well as some potential difficulties.

ACE-Related Websites:

• Guideline for Newcomers to Agent-Based Modeling in the Social Sciences, This site, maintained by Robert Axelrod (U of Michigan) and Leigh Tesfatsion (Iowa State U), provides annotated pointers to introductory readings and demonstration software on agent-based modeling in the social sciences, along with advice for getting started on ABM social science research.

• The ACE Website, maintained by Leigh Tesfatsion (Iowa State University), provides an extensive list of pointers to resources related to Agent-based Computational Economics (ACE), the computational study of economic processes modeled as dynamic systems of interacting agents. These resources include surveys, an annotated syllabus of readings, research resource sites, software, teaching materials, individual researchers, and research groups.

• A site focusing on the ACE modeling of Restructured Electricity Markets, maintained by Leigh Tesfatsion (Iowa State University), provides annotated links to readings, software, individual researchers, and research groups stressing an agent-based computational approach to the study of restructured electricity markets.

• Annotated List of Pointers to Other ACE-Related Websites

Auction Mechanisms (Pricing Protocols)

Authored Readings:

• Dan Friedman and John Rust, eds. (1993), The Double Auction Market: Institutions, Theories, and Evidence, Santa Fe Institute Studies in the Sciences of Complexity, Proceedings Volume XIV, New York: Addison-Wesley.

• D. Gode and Shyam Sunder (1993), "Allocation Efficiency of Markets with Zero Intelligence Traders: Market as a Partial Substitute for Individual Rationality", Journal of Political Economy 101, pp. 119-137.

• Charles A. Holt (1995), "Industrial Organization: A Survey of Laboratory Research", in: John H. Kagel and Alvin E. Roth, Handbook of Experimental Economics, Princeton University Press, Princeton, N.J., Chapter 5, pp. 349-443.
  Abstract: This excellent survey by a well known experimental economist provides a careful thoughtful look at human-subject laboratory experiments focusing on market efficiency effects of alternative auction mechanisms. The chapter is organized around four themes: (1) monopoly regulation and potential entry; (2) concentration and market power; (3) conditions that facilitate cooperation; and (4) product differentiation.

  S. Hunt and G. Shuttleworth (1996), Competition and Choice in Electricity, John Wiley and Sons.

  Detailed description of alternative pricing mechanisms (e.g., auctions) for power pools.

  Paul D. Klemperer, ed. (2000), The Economic Theory of Auctions, Edward Elgar, Cheltenham, UK.

  Paul D. Klemperer, "Auction Theory: A Guide to the Literature" (book chapter, 2000), "What Really Matters in Auction Design" (J. Econ. Perspectives, Vol. 16(1), Winter 2002, 169-189), and other writings are available for downloading at Klemperer's Papers Site.

  R. Preston McAfee and John McMillan (June 1987), "Auctions and Bidding", Journal of Economic Literature 25, pp. 699-738.

  For a summary and commentary on this article, see the online Notes on First Part of McAfee-McMillan, prepared by Leigh Tesfatsion (October 1999) and Notes on Second Part of McAfee-McMillan (WordDoc), prepared by Alexei Kroujiline (October 1999).

  K. McCabe, S. Rassenti, and V. L. Smith (1990), "Auction Design for Composite Goods: The Natural Gas Industry", Journal of Economic Behavior and Organization 14, pp. 127-149.

  P. R. Milgrom and R. J. Weber (September 1982), "A Theory of Auctions and Competitive Bidding", Econometrica 50, pp. 1089-1122.

  Gerry Sheblé (1999), Computational Auction Methods for Restructured Power Industry Operation, Kluwer Academic Publishers, Boston.

  G. Thompson and S. Thore (1992), Computational Economics, The Scientific Press, New York.

  Chapters of particular relevance for auctions are Chapter 1: Transportation Problems (9-21) and Chapter 2: Discrete Auctions (23-32).

  Michael Wellman (Electrical Engineering and Computer Science, University of Michigan). Work by Wellman on market-oriented programming and the University of Michigan AuctionBot can be accessed at Wellman's home page.

  Robert Wilson (Graduate School of Business, Stanford University) is an expert in auction theory who has designed the rules that will govern the Power Exchange (PX), a computerized auction house where major utilities and other power producers will sell their electricity. The rules that Wilson has devised have been tested in human subject experiments by Charles Plott (Cal Tech) and found to work well. For more information, check out Wilson's Course on Market Design that he gives at Stanford. Resources available here include numerous web links on restructuring of electricity industries in the USA, UK, Canada, Mexico, Spain, Australia, Columbia, and general international comparison. He also includes numerous web links related to auction design more generally.

  M. Yajima (1997), Deregulatory Reforms of the Electricity Supply Industry, Quorum Books, Westport.

  Detailed description of alternative pricing mechanisms (e.g., auctions) for power pools.

General Websites on Auctions:

• Agorics, Inc., maintains an Auction Markets Website featuring information on actual and artificial auction markets as well as links to other economic websites.

Game Theory (Pricing and Trading Strategies)

Authored Readings:

• R. Axelrod (1997), The Complexity of Cooperation: Agent-Based Models of Conflict and Cooperation, Princeton University Press, Princeton, NJ. For detailed information about the contents of this book, plus more recent related materials, see Axelrod's Website.

• Ken Binmore and Nir Vulkan (1997), "Applying Game Theory to Automated Negotiation" (pdf,34K), DIMACS Workshop on Economics, Game Theory, and the Internet, Rutgers University, New Brunswick, April.

• Russell W. Cooper (1999), Coordination Games: Complementarities and Macroeconomics, Cambridge University Press, Cambridge, UK. For research updates as well as relevant computer programs, see his Book Website.

• Robert Gibbons (1997), "An Introduction to Applicable Game Theory", Journal of Economic Perspectives, Vol. 11, pp. 127-149.
  See, also, Notes on Gibbons (WordDoc,71K) prepared by Alexei Kroujiline (October 1999).

  Herbert Gintis (2000), Game Theory Evolving: A Problem-Centered Introduction to Modeling Strategic Interaction, Princeton University Press, Princeton, NJ.

  Game theory viewed not as a formal science of rational behavior but as an evolutionary tool kit for studying behavior in a broad array of social settings.

  David Kreps (1990), Game Theory and Economic modeling, Clarendon Press, Oxford, ISBN: 0-19-828381-4 (paperback).

  Abstract: This book provides the reader with basic concepts from noncooperative game theory and explores the strengths, weaknesses, and future of game theory as a tool of economic modeling and analysis. The author concludes that many of the weaknesses of game theory can be addressed by a consideration of individuals who are boundedly rational and learn imperfectly from the past. The style of the book is largely non-technical. Simple but intriguing examples are used to illustrate key points.

  J. Rosenschein and G. Zlotkin (1994), Rules of Encounter, MIT Press, Cambridge, MA.

Websites on Game Theory:

• A Website on Agent-Based Models of Conflict and Collaboration is maintained by Robert Axelrod of the University of Michigan.

• A website on Coordination Games:Complementarities and Macroeconomics is maintained by Russell Cooper (Boston University, Boston, MA) to accompany his book of the same title from Cambridge University Press, 1999.

• Al Roth (Harvard University) maintains an extensive informative website on Game Theory and Experimental Economics.

Learning and the Evolution of Behavioral Rules

Authored Readings:

• Edmund Chattoe, "Just How (Un)realistic are Evolutionary Algorithms as Representations of Social Processes?" (html), Journal of Artificial Societies and Social Simulation, Volume 1, Number 3, June 1998. (Electronic Journal)

• David Goldberg (1989), Genetic Algorithms in Search, Optimization, and Machine Learning, Addison-Wesley, Reading, MA.

• John Holland and John Miller (1991), "Artificial Adaptive Agents in Economic Theory," American Economic Review Papers and Proceedings 81, 365-370.

• Melanie Mitchell and Stephanie Forrest (1994), "Genetic Algorithms and Artificial Life", Artificial Life 1, 267-289.

Websites:

• A site on Learning and the Embodied Mind, maintained by Leigh Tesfatsion (Iowa State University), provides annotated pointers to a variety of learning-related resources useful for the modeling of autonomous adaptive agents.

Network Economics

Websites:

• A website on the Formation of Economic And Social Networks is maintained by Leigh Tesfatsion (Economics, Iowa State University). The site provides annotated pointers to individual researchers, research groups, resource sites, and books.

• A website on Evolution of Networks: ACE Research Area is maintained by Leigh Tesfatsion (Economics, Iowa State University). The site provides annotated pointers to individual researchers, research groups, resource sites, and books that might be of particular interest to those taking an agent-based computational approach to the study of networks.

Software Resources

• Open-Source Software for Electricity Market Research, Teaching, and Training
  Abstract: Many commercially available packages for power system analysis now incorporate components critical for the simulation of restructured electricity markets (e.g. optimal power flow solvers). However, lack of open-source access prevents users from gaining a complete and accurate understanding of what has been implemented, restricts the ability of users to experiment with new software features, and hinders users from tailoring software to specific needs. In addition, these packages can be cumbersome to use for research, teaching, and training purposes requiring intensive experimentation and sensitivity analyses. The goal of this resource site is to encourage the study of restructured electricity markets from a perspective that adequately addresses both economic and engineering concerns. Annotated pointers are provided to free open-source software facilitating the modeling of electricity markets as commercial networks of strategically interacting traders and regulatory agencies learning to operate through time over realistically rendered transmission grids. Suggestions regarding additional pertinent links for this resource site are most welcome.

  Examples of proprietary software incorporating both an electricity market simulation component and real-time dispatch with OPF calculations include: EMCAS (Argonne); Gridview (ABB); LMPSIM (Shaw PTI); MAPS (General Electric); Marketecture (Los Alamos National Laboratory); PROMOD IV (NewEnergyAssociates, a Siemens Company); PROSYM (Henwood); SEPIA (EPRI); and UPLAN (LCG). Examples of proprietary software incorporating real-time dispatch with OPF calculations but no electricity market simulation component include: TRACE (EPRI); SCOPE (Nexant/PCA); Simulator (PowerWorld); PSSE/E (PTI); and IPSA/LMP (UMIST). DOE/EIA's National Energy modeling System (NEMS) incorporates an Electricity Market Module (EMM) but assumes unconstrained dispatch (no transmission costs).

  Disclaimer: This information was collected in September 2004. Check the appropriate company or institutional websites for more current information.

  J. D. Weber (1997), "Implementation of a Newton-Based Optimal Power Flow into a Power System Simulation Environment," M.S. Thesis, University of Illinois at Urbana-Champaign, Department of Electrical Engineering, January. [The software implementation for the OPF system developed in this thesis has been further developed by Weber and is now commercially available under the name PowerWorld.]

  Researchers at the Electric Power Research Institute (EPRI) have developed a Simulator for Electrical Power Industry Agents (SEPIA) designed for the Windows platform. SEPIA is a comprehensive, high-fidelity, and scenario-free modeling and optimization tool with plug-and-play agent architecture.

  Pointers to Network-Related Software Tools and Computer Demos

  Software and Toolkits for Agent-Based Computational Modeling

Case Study Resources

GENERAL REGULATORY POLICY:

• For information on the Energy Policy Act of 2005, visit here.

• Shirley Neff (Columbia University), "Review of the Energy Policy Act of 2005" (pdf,214K), August 2, 2005.

MULTIPLE CASE STUDY COVERAGE:

• Check out Robert Wilson's Course on Market Design that he has given at the Stanford University Graduate School of Business. Resources available here include numerous web links on the restructuring of the electricity industries in the USA, UK, Canada, Mexico, Spain, Australia, and Columbia, as well as international comparison.

AUSTRALIA:

• The Centre for Energy and Environmental Markets (CEEM) at the University of New South Wales undertakes interdisciplinary research on the design, analysis, and performance of Australian energy and environmental markets and their associated policy frameworks.

CALIFORNIA (U.S.A.):

Authored Readings:

• Severin Borenstein, James Bushnell, Edward Kahn, and Steven Stoft (1995), "Market Power in California Electricity Markets", Utilities Policy 5:3-4, 219-236.

• Severin Borenstein (2002), "The Trouble with Electricity Markets: Understanding California's Restructuring Disaster", Journal of Economic Perspectives 16(1), pp. 191-211.

• J. Bushnell and S. Oren (1997), "Transmission Pricing in California's Proposed Electricity Market", Utilities Policy 6(3), pp. 237-226.

• Adrian T. Moore and Lynne Kiesling (2001), "Powering Up California: Policy Alternatives for the California Energy Crisis" (pdf,335K), Reason Public Policy Institute (RPPI), Policy Study No. 280, February 2001.
  This study examines: (1) The most important aspects of what went wrong with restructuring in California; (2) How deregulation of electricity has worked in other states and even other nations; and (3) Governor Gray Davis' action plan, point by point.

Websites on the California Electricity Industry:

• California Independent System Operator (ISO) Website

• The California Independent System Operator (ISO) Open-Access Same-Time Information System (OASIS)

MIDWEST (U.S.A.):Stress on Iowa

Websites:

• The Ames Municipal Electric System (A.M.E.S.) is linked through the Mid-Continent Area Pool (MAPP) -- see above -- to utilities in nine Midwestern states and two Canadian provinces.

• The Iowa Energy Center site contains extensive information about the electricity industry in Iowa.

• The Iowa Utilities Board (IUB), an independent division of the Iowa Department of Commerce, regulates the rates and services of electric, natural gas, telephone, and water utilities in Iowa. The stated mission of the IUB is to ensure that reasonably priced, reliable, and safe utility services are available to all Iowans, supporting economic growth and opportunity.

• The Mid-Continent Area Power Pool (MAPP) is a voluntary association of electric utilities doing business in the Upper Midwest of the U.S.A. The MAPP organization performs three separate functions: it is a Reliability Council, responsible for the safety and reliability of the transmission system, under the North American Electric Reliability Council (NERC); a Regional Transmission Group, responsible for facilitating open access of the transmission system; and a Power and Energy Market, where MAPP members and non-members can buy and sell electricity. MAPP is one of the ten Regional Councils forming the North American Reliability Council (NERC), whose primary mission is to maintain the safety and reliability of the North American electric system.

• The Midwest ISO (MISO) was approved as the U.S.A.'s first Regional Transmission Organization (RTO) in 2001. Headquartered in Carmel, Indiana, MISO manages one of the world's largest energy markets spanning 15 states and the province of Manitoba. Consistent with FERC's Order No. 200 and its Midwest Markets Tariff, the MISO operates and administers this energy market using bid-based security-constrained economic dispatch and locational marginal pricing in accordance with the Midwest Market Initiative launched in April 2005.

• Information on any electricity legislation coming up for consideration in Iowa be found at the home page for the Iowa Legislature

NEW ENGLAND AREA (U.S.A.):

Main Site:

• ISO New England Home Page

NEW ZEALAND:

Authored Readings:

• Mario E. Bergara Duque and Pablo T. Spiller, The Introduction of Direct Access in New Zealand's Electricity Market (html).

• E. G. Read (1997), "Transmission Pricing in New Zealand", Utilities Policy 6(3), 227-235.

PENNSYLVANIA-NEW JERSEY-MARYLAND (PJM):

Websites:

• PJM Manuals

• PJM Users Guide

SPAIN:

Authored Readings:

• Natalia Fabra (2003), "Price Wars and Collusion in the Spanish Electricity Market," Presented at the Eight Annual POWER Research Conference, Electricity Industry Restructuring, UCEI/CSEM, March 14.

• J. J. Gonzalez and P. Basagoiti (1999), "Spanish Power Exchange Market and Information System Design Concepts, and Operating Experience" (pdf,95K), Proceedings of the 21st International Conference on Power Industry Computer Applications.
  Abstract: This paper describes in detail the market principles underlying the Spanish electricity market (COMEL) begun on January 1, 1998, and the experience gathered through the design, installation, and first year of operation of COMEL.

UNITED KINGDOM:

Authored Readings:

• John Bower and Derek Bunn (2001), "Experimental Analysis of the Efficiency of Uniform-Price versus Discriminatory Auctions in the England and Wales Electricity Market," Journal of Economic Dynamics and Control Volme 25(3-4), 561-593.

• John Bower and Derek Bunn, "A Model-Based Comparison of Pool and Bilateral Market Mechanisms for Electricity Trading" (WordDoc,155K).
  Abstract: The authors develop an agent-based computer simulation model of the wholesale electricity market in England and Wales as a means of systematically testing the potential impact of alternative trading arrangements on market prices.

  Christopher J. Day and Derek W. Bunn, "Generation Asset Divestment in the England and Wales Electricity Market: A Computational Approach to Analysing Market Power" (WordDoc,509K).

  Abstract: The authors develop an approach to modeling competition between electricity generating companies based on computational modeling and simulation. In this approach, each company, or agent, is modelled with specific objectives and bounded reasoning abilities. Using the price-setting mechanism found in the England and Wales pool, the interaction of the generating companies is simulated through time.

  Nils-Henrick M. von der Fehr and David Harbord (May 1993), "Spot Market Competition in the UK electricity industry", Economic Journal 103, 531-546.

  Richard Green and David Newbery (1992), "Competition in the British Electricity Spot Market", Journal of Political Economy 100:5, 929-953.

  Abstract: This paper focuses on horizontal market power problems at the generation level that have arisen in England and Wales since their 1990 electricity industry restructuring -- e.g., difficulties in stimulating appropriate investments in transmission capacity that properly take into account the costs of network congestion.

  David Newbery (1995), "Power Markets and Market Power", Energy Journal 16:3, pp. 39-66.

  Horizontal market power problems in England and Wales in the 1990s.

  David Newbery (1998), "Viewpoint - Freer Electricity Markets in the UK: A Progress Report", Utility Policy 26(10), 743-749.

  D. M. Newbery and R. Green (1996), "Regulation, Public Ownership, and Privatization of the English Electricity Industry", in International Comparisons of Electricity Regulation, edited by Gilbert and Khan, Cambridge University Press.

  Frank Wolak and Robert H. Patrick (1996), "The Impact of Rules and Market Structure on the Price Determination Process in the England and Wales Electricity Market", mimeo, Department of Economics, Standard University.

  Catherine Wolfram (1999), "Measuring Duopoly Power in the British Electricity Spot Market", American Economic Review 89, 805-826.

  Abstract: This article presents an empirical study of market power in the British electricity industry. Estimates of price-cost markups are derived using direct measures of marginal cost and several approaches that do not rely on cost data.

  See, also, Notes on Wolfram (WordDoc,58K) prepared by Matthew Smith (October, 1999).

  Catherine Wolfram (1996b), "Strategic Bidding in a Multi-Unit Auction: An Empirical Analysis of Bids to Supply Electricity in England and Wales", mimeo, Department of Economics, Harvard University.

Websites on the United Kingdom Electricity Industry:

• The Electricity Association is the collective voice of the major electricity companies in the United Kingdom.

OTHER CASE STUDY RESOURCES

Online Resources:

• Nicholas Economides (New York University, N.Y.). Economides maintains an Electricity -- Economics of Networks website that provides pointers to research institutions and commercial sites related to electricity, including: the Edison Electric Institute; The Electricity Institute; the Electric Power Research Institute (EPRI); The Federal Energy Regulatory Commission (FERC); the North American Electric Reliability Council (NERC); the UK Office of Electricity Regulation; the Transmission Systems Information Networks site; and a Yahoo listing that provides links to individual electricity companies.

• The Edison Electric Institute (EEI) is an association of shareholder-owned electric companies. EEI provides a forum for individuals in the electric power industry to exchange ideas and experiences and to communicate with a variety of audiences, including government.

• The Federal Energy Regulatory Commission (FERC) is an independent regulatory agency within the Department of Energy.

• An extremely useful Glossary of Terms related to electricity restructuring is maintained by the California ISO at its Open-Access Same-Time Information System (OASIS) web site.

• The goal of the North American Electric Reliability Council (NERC) is to promote the reliability of the supply of electricity for North America.

• Power Online Services Ltd. is a commercial website directory.

• TSIN.COM is a website devoted to the ongoing development and implementation of Transmission System Information Networks (TSINs) for the electric power industry.

Acknowledgments:

The development of this website since 1999 has been funded in part by the National Science Foundation under a contract titled "Decision Models for Bulk Energy Transportation Networks, in part by an EPRC Research Grant, in part under a consultancy agreement with the Los Alamos National Laboratory, and in part by the National Science Foundation under a contract titled "Computer Simulation of Electric Marketplaces Using Artificial Adaptive Agents." Additional funding was provided by the Electric Power Research Institute and the Department of Defense through a contract titled "Innovative Technologies for Defense Against Catastrophic Failures of Complex Interactive Power Networks," a cooperative effort by Iowa State University, the University of Washington, Arizona State University, and Virginia Polytechnic and State University under a Joint Initiative on the Analysis of Complex Dynamical Systems.

Copyright © 2007 Leigh Tesfatsion. All Rights Reserved.