ABSTRACT
A crucial consideration in bringing competition to the electricity industry is establishing a market framework so that those who produce electricity can sell it to those who want to use it. For other commodities, one might be confident that the process of setting up markets would take care of itself, but electricity has two unusual characteristics that greatly complicate the development of a competitive market. The first characteristic is one we have mentioned already: electric power systems require constant balancing to ensure that the amount of power users demand is neither more nor less than the amount of power being generated. The second characteristic is that the flow of electricity within the power system cannot be confined to a predetermined path. These two characteristics, peculiar to electricity, have to be accommodated by any proposal to implement competition in that market. As a result, such proposals must not only define the type of competition that will be implemented but also provide a framework for maintaining load balances and for pricing transmission once competition has been enabled.
