POWER MARKET TESTS HYBRID OPTION

Auctions to determine electric suppliers for customers who choose not to shop solve a major challenge in power deregulation and, in the process, determine a market price for the risk involved in serving these customers. At the leading edge of this policy development is the New Jersey basic generation service (BGS) auction. The closely watched results are providing a template for other regulatory jurisdictions and a basis to understand the cost of risk associated with providing ""full requirements"" power to customers at a fixed price over a defined term.

- The New Jersey model appeals to a broad base of retail energy's stakeholders.
- The BGS auction is a transparent process that shifts risk to market participants that are willing to hold that risk.
- Competitive forces are applied from the wholesale market without requiring customers to actively choose alternative suppliers.
- CERA expects the model to spread to other areas that have arrived at the end of transition period arrangements.

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CERA Reports Online, a wholly owned subsidiary of IHS Energy, is a leading advisor to international energy companies, governments, financial institutions, and technology providers. CERA delivers critical knowledge and independent analysis on energy markets, geopolitics, industry trends, and strategy. CERA's expertise covers all major energy sectors--oil and refined products, natural gas, and electric power--on a global and regional basis.