"Wholesale-only" electricity competition will not work because the market power of generators and suppliers cannot be adequately mitigated, the Electricity Consumers Resource Council, a Washington-based organization that represents large industrial users, said in a report released Friday.
The 72-page study, "Preventing Market Failures on the Road to Competition," analyzes the causes of recent market failures in California and the potential for similar occurrences elsewhere in the country.
Among the report's recommendations is the need to include demand-side mechanisms in a competitive market.
Establishing a system that permits users to curtail load in response to price signals will reduce demand and drive down wholesale and retail prices," the ELCON study said.
Other recommendations include the creation of a bilateral market structure with physical transmission rights; fair and nondiscriminatory new generator interconnection rights; adequate natural gas infrastructure; adequate new generation and fuel supply, adequate transmission capacity and large independent regional transmission organizations.