Introduction: Economic and Technological Principles in Designing Power Markets

As a consequence of complex interactions of political, socioeconomic and technological forces, the electric power industry, both in the United States and abroad, is undergoing a fundamental transformation in institutional structure. Public ownership or regulated private monopoly is being replaced by market designs that emphasize greater decentralization and competition. As electric restructuring spreads rapidly across countries and states, however, a growing concern shared by some leading industry experts is that in many instances, policy makers are pushing their proposals into practice more quickly than policy analysts can provide answers to difficult questions of market design. In this process, different structures for organizing this industry are evolving without a firm basic understanding of their implications for long term market performance. There is a risk that the process may be inadvertently locked into an inferior market design which will be costly to change.