The National Science Foundation (NSF) has awarded a group of Cornell University economists and engineers a multidisciplinary grant to study the effects of competitive markets on the reliable operation of the electricity supply system.

The award, totaling $282,655, comes from the NSF's divisions of Electrical and Communications Systems and of Social, Behavioral and Economic Research.

The Cornell researchers involved in the project are Timothy Mount, professor of agricultural, resource and managerial economics, and director of the Cornell Institute for Social and Economic Research; Richard Schuler, professor of economics and of civil and environmental engineering, and director of the Cornell Institute of Public Affairs; William Schulze, the K.L. Robinson Professor of Agricultural Economics and Public Policy; Robert J. Thomas, professor of electrical engineering, and director of the Cornell-led multi-university Power Systems Engineering Research Center; and Ray Zimmerman, electrical engineering research associate.

Deregulation is increasing competition in the power generation part of the electric utility industry, and it is beginning to offer consumers a choice through their local distribution companies.

Using a simulated Northeast electricity grid and data from laboratory experiments in market behavior, the Cornell researchers will examine new operating rules for the system and the effects of alternative market structures. They will seek to strike a balance in their study between ideal market mechanisms and traditional utility practices that promise to provide inexpensive energy for consumers, while maintaining system stability and reliability.

Says Schuler: "The electricity market is unique, the epitome of a just-in-time delivery system. You cannot build inventory, and if you do not find the right customer for your product at the right time and price, the potential consequences are tremendous for both the provider and the consumer."

Comments Thomas: "This is a perfect example of a challenging problem requiring the talents and expertise of both engineers and economists in order to create practical results of benefit to society."