When a power utility enters a power pool, it is joining and communicating with a coalition of other power generation facilities. This cooperation leads to less expensive and more reliable energy throughout the power pool’s region. The World Bank describes the benefits of these agreements, explaining, “Regions with low cost generation resources could become net exporters of power, while electricity customers in high cost areas could benefit from cheaper imports.”
At one time, power pools controlled both the generation and transmission of energy. In today’s deregulated energy market, power pools (also referred to as power exchanges) are only for the wholesale trading of power between utilities. Transmission of power between plants and to customers is kept separate to minimize the risk of collusion or insider trading.
Regional Transmission Operators (RTOs) and Independent System Operators (ISOs) ensure that transportation of traded power is open and fair for all parties. These organizations are independent and non-profit, which aids them in planning and developing current and future transmission that benefits all members of an energy pool.
In power pools, communication and joint planning can include co-ownership of power plants, sharing of reserves and using the lowest-cost energy option within the power pool first. These joint ventures come with positives, as discussed above. There are also negatives. These include the time required to come to joint decisions and the loss of autonomy or flexibility for individual utilities.
There are two types of power pools: tight pools and loose pools. In a tight power pool, there are specific agreements between all members. This leads to a central control center that directs member utilities’ control centers. In this arrangement, the lowest cost power is used first and most often. Tight power pools enjoy more benefits than loose power pools because loose pools are generally only an exchange of energy between two members of the group when necessary. The members are largely independent, with some common projects.
