A Review of ISO New England's Proposed Market Rules

This report reviews the proposed rules for restructured wholesale electricity markets in New England. We review the market rules, both individually and collectively, and identify potential problems that might limit the efficiency of these markets. We examine alternatives and identify the key tradeoffs among alternative designs. We believe that the wholesale electricity market in New England can begin on December 1, 1998. However, improvements are needed for long-run success. We have identified four major recommendations: 1. Switch to a multi-settlement system. 2. Introduce demand-side bidding. 3. Adopt location-based transmission congestion pricing, especially for the import/export interfaces. 4. Fix the pricing of the ten minute spinning reserves.