An Analysis of Interfirm Cooperation: Theory and Evidence from Electric Power Pools

Abstract

A power pool is a group of two or more electric public utilities that coordinate their activities with regards to the generation and transmission of electricity. Coordination can occur along several dimensions including the connection of generation facilities with transmission lines, joint planning for the construction of new facilities and lines, and meeting demands for electricity by dispatching from the least cost generating source across member utilities at any given time. Utilities participating in pools will enjoy benefits and incur costs that generally depend on the degree of coordination. As argued below, loose coordination will mean low costs but few benefits, while tight coordination means high costs but greater benefits.