Emerging electronic markets at e‐Business crossroads: competitive and regulatory issues in the electricity industry

Abstract

Natural history depicts evidence of the dynamics of evolution, while fossil records permit the examination of change over time. Such records inform us also that change is never easy and does not occur without casualties. It seems that parallel observations may be advanced as the Internet and widespread use of information and communication technologies (ICT) have brought about new organizational forms, entirely new ways of organizing, as well as enabling novel processes. One casualty reflective of an evolutionary era is the dot‐com firms that have gone bust. As firms are moving along the evolutionary path of understanding and implementing these developments we need to come to grips with their design, management and impact. This contribution examines electronic markets and related off‐shoots as a coordination form and macro‐structure of information and communication systems within the electric power market. The basic notion of ‘electronic market’ is explored briefly. We recognize several forms in which such markets manifest themselves. The author emphasizes the role of competition in electronic markets, as well as the newly found role of intermediaries. Electronic markets in the electricity industry are examined in some detail, i.e. the electronic trading of electricity. This market demonstrates nicely the opportunities, but also potential pitfalls of electronic trading of this commodity, especially given relatively recent experiences with the electricity supply situation in the State of California, as well as the demise of Enron. A number of patterns, trading practices and regulatory concerns are highlighted. At the same time though similar underlying problems are applicable in all industrialized nations and selected examples are provided.