clipped from www.nytimes.com

Mrs. Showalter compared prices in 13 states and Washington, all of which have adopted market pricing for industrial users, with the rest of the nation. The 13 states are California, Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Montana, New Hampshire, New Jersey, New York, Rhode Island and Texas. Montana is returning to regulated pricing.

Under the rules of these markets, every electric power generator whose bid is accepted gets the highest price paid to supply power, called a clearance price or single-price market. In most auctions, each supplier gets the price at which they offered to sell, known as an as-bid market.

One result of clearance pricing is that nuclear power plants, which must run at a steady rate even when demand for power is minimal, have at times collected $990 per kilowatt-hour for power they had offered to give away during low-demand hours.
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Markets are just horrible, horrible, bad, evil things right? So much so that power should be regulated, or at least that is what New York Times journalist David Cay Johnson posits in his fluff piece on electrical markets.

Note, there are three basic portions, let’s see if you see the irony:

1) Some states have changed to market pricing
2) "Under the rules"… Well I don’t know about you but "deregulation" means that you have no rules in the marketplace.
3) Clearance pricing in a market is probably not the best means of moving your product. Here I would agree more to the side of the author – not a great way to do business… but… the power market isn’t quite an ideal market if you have a penchant for risk aversion. Due to the weird nature of electricity, we have no means of actually storing energy for long periods of time. This is why market prices fluctuate, especially in the case of nuclear power, so greatly – you can’t always stop and start your production on a dime…

Then again, as the article points out, governments that shift to markets aren’t really giving markets a fair break when they cut the cost of power during the transition. And yet another point of note – how heavily invested are local governments in progressing our electrical systems through research and development? Given that our power infrastructure isn’t very much dissimilar from when it was first laid out, can this be the explanation of why our power grids look like geriatric patients on steroids?

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