Acquiring energy resources in a competitive market

Since the opening of the energy market to competitive forces, power delivery companies have seen increased uncertainty regarding the source of energy to serve customers in their service areas. For many companies, the decisions related to the siting, timing, and operation of individual totally out of their control. These companies and their regulators are learning to cope with the new skills and techniques necessary to assure the availability of supply in this new market. The problem is made more difficult for many because they are prohibited from owning and operating generation resources due to fear that they will exercise vertical market power and prevent consumers from gaining access to competitively priced energy. When the series of discussions that formed the basis for this article began, the question to be answered was: How do energy delivery and energy service companies plan for the construction of new generating plants in a deregulated environment? The answer is, they donʹt. They must team a new set of skills to match a set of contracts, options, and other derivatives to the forecast for energy. They must manage risk using market instruments.