Recent moves to open up electric power transmission networks to foster generation competition and customer choice have touched off a debate over how the transmission system should be restructured in order to meet the goal. The opposing sides of this debate are now commonly represented by the bilateral model and the poolco model. Both models resort to conventional centralized operation in dealing with the shared resources of an integrated transmission network. The conventional operating paradigm was developed in a different era for electric utilities operated as regulated monopolies. A new operating paradigm is needed for a restructured industry that encourages efficient competition and at the same time maintains necessary coordination to guarantee a high standard of reliability.
Economic decision is carried out by private multilateral trades among generators and consumers.
The function of reliability is coordinated through the power system operator who provided publicly accessible data based on which generators and consumers can determine profitable trades that meet the secure transmission loading limits. Wu and Varaiya prove that any sequence of such coordinated private multilateral trades, each of which benefits all parties to the trade, leads to efficient operations, i.e., maximizes social welfare. The coordinated multilateral trading model achieves all the benefits of a centralized pool operation without the visible hand of a pool operator in economic decisions. They show that the existing communications, computing and control infrastructure is adequate to support the proposed model.