More price elasticity desirable

✍ Scribed by Stalon, Charles G.

• Book ID: 102844229
• Publisher: John Wiley and Sons
• Year: 2007
• Weight: 642 KB
• Volume: 16
• Category: Article
• ISSN: 0743-5665
• DOI: 10.1002/gas.3410160306

✦ Synopsis

everal states have taken dramatic steps to S create efficient electricity markets. However, some, perhaps all, of these markets tend to retain features that keep the efficiency of such markets significantly below their potential. In fact, it appears that some beneficial characteristics of the old system may have been eliminated before market substitutes were in place. Many of the features were essential parts of the regulated electric industry. Some of these undesirable features are scheduled to be phased out and others may fade to insignificance under market pressures, but on the other hand they may not. Until they are eliminated, they complicate an already complex transition problem.

. . . beneficial characteristics of the old system may have been eliminated before market substitutes were in place.

Many market demands in the new electricity markets are presently relatively insensitive to prices. This insensitivity constitutes a serious structural deficiency in the electricity and ancillary services markets. In particular, price volatility in these markets is unnecessarily and inefficiently large.

These inelastic demand curves arise for many reasons: First, most users, even large ones, continue to buy electricity from their distribu-

Charles G. Stalon, a consultant in St. Charles, Missouri, is a former commissioner of the Federal Energy Regulatory Commission and of the Illinois Commerce Commission.