In the United States and around the world, electricity restructuring is converting regulated monopolies into market regimes. The characteristics of those markets, however, are critical determinants of their performance and remain the subjects of active policy debate. One important issue is whether electricity markets can -- without government intervention -- provide adequate generation to reliably power society's needs, say Andrew N. Kleit, professor of energy and environment economist at Pennsylvania State University, and Robert J. Michaels, professor of economics at California State University, Fullerton.
Advocates of intervention believe that competitive markets for energy should include additional payments to firms for having reserve generation capacity beyond what ordinary electricity rates would incentivize. Critics of this idea see such "capacity payments" as unnecessary subsidies to electricity producers.
