Abstract: Restructuring is causing fundamental changes in the market for electricity across North America including changes in the framework for decisions about investment in generation capacity. In a restructured market the generator is no longer guaranteed a reasonable rate of return on assets; instead new investments will earn whatever the spot market or contract market will pay. The market price will be determined by the marginal cost of existing price setting units, the market structure, demand, and the cost of new capacity. Environmental regulations may have a significant impact on that price. This paper summarizes the principal features of restructured electricity markets and their implications for the future price of electricity and for the future of nuclear power, using the emerging rules for the Ontario electricity market as an example.
Keywords: electric utilities, electricity restructuring, nuclear power, nuclear generation, air pollution, emission trading, Ontario, spot market
JEL Classification: L94;L51;Q25