The role of analytical models: Issues and frontiers

A number of modeling attempts to analyze the implications of increasing competition in the electric power industry appeared in the early 1970s and occasionally throughout the early 1980s. Most of these of these analyses, however, considered only modest mechanisms to facilitate increased bulk power transactions between utility systems. More fundamental changes in market structure, such as the existence of independent power producers or wheeling transactions between customers and utility producers, were not considered. More recently in the course of the policy debate over increasing competition, a number of models have been used to analyze altemative scenarios of industry structure and regulation. In this Energy Modeling Forum (EMF) exercise, we attempted to challenge existing modeling frameworks beyond their original design capabilities. We tried to interpret altemative scenarios or other means of increasing competition in the electric power industry in the terms of existing modeling frameworks, to gain perspective using such models on how the different market players would interact, and to predict how electricity prices and other indicators of industry behavior might evolve under the altemative scenarios.