The art of market design-what's next for power markets and SMD?

Electric utilities use to be vertically integrated monopolies until we embarked on a restructuring of the industry to introduce competition in electric supply. There are many factors that influenced the transition to competition. Most important, perhaps, was the underlying premise that competitive markets could bring greater benefits to customers through efficiency and innovation than was possible under the existing regulatory regime. The California power crisis, Enron's meltdown, allegations of market manipulation, accounting improprieties, and the weak financial condition of many generators have caused some question that premise and have undermined the confidence in competitive markets. This article takes stock of where we are on the transition to competitive markets and the future of efforts to establish standard market design (SMD).