January 2002
Electricity Goes to Market
Building intelligence into the power grid would make electricity cheaper and more reliable. The technology-from self-monitoring power lines to giant transistors-is ready to go. But no one has an incentive to foot the bill.
By Robert Pool
Economists aren't generally known for consensus of opinion, but there's one point on which almost all of them agree: regulated markets are less efficient and end up costing consumers more than unregulated markets. It is this conviction that has driven the deregulation of the electric utility industry over the past decade. In a free electricity marketplace, the theory goes, the forces of supply and demand would drive the industry to become more efficient and reliable. Electricity prices would drop, supplies would increase and companies would make rational investment decisions based on expected returns. Because one unit of power is indistinguishable from any other, electricity would ultimately become a commodity, bought and sold on the basis of price with no concern over whether it was produced a few kilometers away or halfway across the country.
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