January 1, 2004
Harvard Electricity Policy Group, John F. Kennedy School of Government
The author of this short report starts with the observation that the idea that market in effect "pays" the utilities and traders to monitor the condition of the grid with every transaction, is simple and elegant. He notes that some still persist in separating the notion of reliability from the economic incentives we offer to transmission customers. But, according to him, LMP markets go beyond economics. LMP markets actually help ensure reliability.
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