My research project is an experimental analysis of the US electric power transmission business. Because the Federal Energy Regulatory Commission (FERC) ordered regulated utilities to provide open access to their transmission networks and to separate their generation and transmission functions, transmission networks have been used more intensively and in much different ways then in the past. This has challenged the adequacy of electric power transmission networks. Thus, the core question addressed in this research project is this: what is the optimal transmission institution for a deregulated electric power industry, and how can we get there? I begin with a model of an electric power system with a competitive generation sector. I derive the competitive electricity market results under three unique transmission network institutions: a system operator with no transmission rights, a system operator with financial transmission rights, and a quasi-system operator with physical transmission rights. I also design and implement an experiment to empirically test the theoretical predictions under these alternative institutions.

Working with Professor Roth, and also Professors Vernon Smith, Steven Rassenti, and Bart Wilson (University of Arizona), I have designed an electric power double-oral auction experiment. In that experiment, all that varies is the property-right institution that governs the transmission network. In cell one, the subjects will participate in a series of electric power auctions with no rights and then I will introduce financial transmission rights; in cell two, different subjects will participate in a series of electric power auctions with no rights and then I will introduce physical transmission rights.

The objectives of this experiment are (1) to observe whether or not these two property right structures lead to statistically different market results, and (2) to measure the efficiency – measured as observed gains from trade over potential gains from trade – of each institution. The empirical results should be of interest not only to theorists, but also serve the function of whispering in the Ears of Princes – it will aid policymakers.