B ritish system but mo dify i ng ot hers. Now the British gov-
ern ment has em b a rked on a radical reform of the ele ct ric-
i ty ind ust ry and is prop os i ng “New Ele ct rici ty Tradi ng
A rra ngement s,” or neta. The cha nges to the ele ct rici ty
ma rket are to ta ke ef fe ct in the fall of 2000. Some of the
cha nges will bri ng Bri tain in line with what ot her cou nt ries
have done, but ot her cha nges will be unique.
Is Bri tain poi sed to leap frog the rest of the world, adopt-
i ng every ma rket featu re that has proved suc c essful and
mo dify i ng those that have not? Shou ld the rest of the world
be fol low i ng Bri ta i n’s lead on some of these cha nges? I
b el ieve the answer to both quest ions is a de ci s ive “no.”
A l t hough prop osed reforms to int ro d uce dema nd- s ide bid-
ding and encourage fi nancial innovation make sense, the
British government’s proposal to pay suppliers their bids
rather than the market-clearing price will not help achieve
t he stated goals of fosteri ng comp et i t ion and loweri ng pric es.
ELECTRICITY MARKET RESTRUCTURING
electricity restructuring initiatives around the
world have been based on several pri nciples. It is genera l-
ly re cog n ized that any econom ies of sca le in the pro d uc-
t ion of ele ct rici ty are ex hausted at the level of a me di u m-
s ized generat i ng pla nt. For insta nc e, new com bi ne d- cycle
gas tu rbi ne pla nts have re c ent ly been bu ilt with as little as
200 to 300 me gawatts of capaci ty, ab out one- f ifth the
capaci ty of most nuclear power pla nt s. Comp et i t ion in
E N E R G Y
A formu la for inef f icient pro d uct ion and hig her pric es
ritain was one of the first countries to
l i b era l ize its ele ct rici ty ind ust ry when it rest ructu re d
a nd privat ized the ind ust ry in 1990. Since then, a
nu m b er of cou nt ries and a ha nd ful of U. S. states
have underta ken their own ele ct rici ty reform prog ra m s. At least a dozen more states are in the pro c ess of adopt i ng le g i s la-
t ion to rest ructu r