N-1Report
4 passages
Competing Suppliers The act of establishing competing suppliers (more substitutes) will increase the price elasticity of demand faced by individual generation companies (so long as transmission is inexpensive and open access prevails), tho...
AI summary Introducing competing suppliers increases price elasticity for individual generation companies, though market-wide effects remain unclear. Long-term market forces may foster substitutes like self-generation and distributed generation, particularly for large industrial customers.
Current Supply Elasticity Estimates Supply elasticities, per se, do not exist in a regulated retail electricity market. Prices are set beforehand in a regulatory proceeding, and utilities must supply all retail power demanded at the price...
AI summary In regulated retail electricity markets, supply elasticities do not exist as prices are predetermined, requiring utilities to meet demand at set rates. However, in Western wholesale markets, supply elasticity exists due to competitive generation and transmission constraints. Hydropower availability and fossil fuel costs further influence elasticity, making it weather-dependent and volatile.
Changes in Supply Elasticities Due to Restructuring Given that FERC open transmission access policies and the creation of an ISO will reduce transmission access constraints, supply elasticities should be higher in the long run. The incenti...
AI summary Restructuring, including FERC open transmission policies and ISO creation, will increase supply elasticities by making generation more market-driven. However, during the transition, the Competitive Transition Charge (CTC) may reduce elasticities for utilities' plants. Must-run units, with performance-based rates, will remain unaffected even if market prices fall below costs.
CONCLUSION During the transition to the competitive market, changes in the price elasticity of demand and supply are likely to be small. In the longer term, competition may increase the price elasticity of both demand and supply. Existing...
AI summary The transition to a competitive electricity market may increase price elasticity of demand and supply over time, with long-term effects similar to deregulation in other industries. FERC and ISO are expected to reduce transmission constraints, enhancing supply elasticity, though new generation entry will remain gradual due to lead times and risk.