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# **3.2.2 'Pooling'-Open Access Without Predetermined Rights to Use Capacity**

The open access rules outlined above attempt to enable competition over the network by selling rights to network capacity to competing firms on a non-discriminatory basis. However, it may be difficult to define, adjust and enforce such rights in a manner that allows effective competition to take place. For example, in power systems a complete set of access or capacity rights may be undefinable. Power flows through a network according to Kirchhoff's law. What capacity is used or unused at any moment in any part of a power system is a function of all physical flows throughout the system and not a function of bargaining or individual transport decisions. It may not therefore be practical to define capacity or access rights for power systems. What can be done, however, is to have a central dispatch system that optimizes system flows, instantaneously matching supply and demand. There is open access in such a system in the sense that the power of - - winning bidders will always and by definition be dispatched. The use of capacity is then flexibly determined by the dispatch system. There is no need for trade in capacity rights e.g. in response to short-term shutdowns of power plants and no need to compensate holders of capacity rights for the effect of power flows on available capacity.

This solution to competition over power transmission systems has by now been tried in several countries. Chile introduced a competitive power pool in 1978. when its system was still publicly owned. Least-cost dispatch continues to be on the basis of audited costs of power plants, not on continuous price bids by generators. Bidding thus takes place implicitly as costs are reset. The United Kingdom introduced a competitive bulk power market on the basis of half-hourly price bids in 1990. However, both Chile and the United Kingdom continue to suffer from high market concentration in the generation segment and a lack of barriers against vertical integration. The Argentine system introduced in 1992 places strict limits on horizontal and vertical integration thus effectively creating the conditions for workable competition. However, so far "bids" are based on audited cost data rather than price bids by generators. All the foregoing systems set transmission prices in an essentially administrative way, i.e. they do not allow congestion prices to be established by the smart market. Norway introduced its competitive pool in 1992 and is trying to generate prices by the smart market including congestion prices. Most recently the Province of Victoria in Australia is introducing a competitive bulk market for power. Results from the introduction of competition remain encouraging. In the United Kingdom productivity of generators has roughly doubled within four years, including for the remaining public nuclear power operator. Productivity in the industry segments not subject to competition i.e. distribution has also increased, but only by about 10 percent. In Argentina, the switch to a private competitive system quickly resolved all of the urgent problems of power shortages and created a situation of temporary excess capacity essentially because the new generating firms efficiently rehabilitated and operated existing plants.