Jeff Guo

And still other companies would be in charge of power generation.

The idea was deregulation.

You'd get more competition and hopefully that would make electricity prices come down.

If we were starting a system from scratch today, would we design the one that we have now?

Like on a really hot day in the summer.

If everybody turns on their air conditioners on August 17th and there's not enough power to supply it, what happens?

Now, before deregulation, when it was one utility company's responsibility to handle everything for a particular area, distribution, transmission and generation, it was that company's responsibility to make sure there were no shortages, you know, no rolling blackouts.

They had to forecast how much power they would need in the future and make sure there were enough power plants to meet that future demand.

Yeah, think about what happens in a market when there is a shortage of something.

Prices, they go way, way up.

In theory, that should incentivize companies to start making more power, and eventually everything would be fine.

But A, nobody wants to get an electric bill for $1,000 because they ran their AC on a super hot day.

And B, rolling blackouts are also obviously not a great outcome.

This new market would make sure that enough new power plants were being built today to supply the electricity that would be needed years from now.

They called it the capacity market.

And so the idea is that I'm a power plant operator.

And even if nobody is buying my energy, I'm still going to get this revenue stream just for being willing to supply power on those peak demand days, just to say I'm ready to, if you need it.

It's hard to stress enough how weird the capacity market is.

So PGM will try to model how much power the region is going to need three years out into the future.

And then it will hold an auction where it will determine how much power plants should be paid for promising to be available in case they are needed on that one super hot day when everyone turns on their AC.