Industry Structure and Regulation in the England and Wales Electricity Market

Abstract

March 31, 1990 marked the vesting and operational beginning of an economically restructured electric utility industry in the United Kingdom. Almost all wholesale purchases of electricity in England and Wales are legally mandated to take place through a spot market which sets day-ahead prices for all half-hour periods during the next day. These prices are calculated from the day-ahead half-hourly supply schedules submitted by all generators serving the market and a forecast of the market-level demand for each half-hour period during the following day. Although there have been a number revisions in regulatory rules to control the suspected exercise of market power by generators during this evolving industry restructuring, the England and Wales (E&W) market has been promoted as the model for liberalizing the electricity generation industry in many regions of the United States and worldwide. An example is a plan the California Public Utilities Commission (CPUC) approved in late December of 1995 (and revised in late Spring of 1996), which calls for establishing an electricity spot market or “Poolco” similar to the E&W electricity market, through which all generators would sell power to electricity retailers and large customers in California.

We would like to thank Janie Chermak, Michael Crew, and Carl Pechman for helpful comments.