FERC's Standard Market Design: Too Detailed To Evolve

The Federal Energy Regulatory Commission's standard market design (SMD) proposal states objectives that are important and supportable, both theoretically and empirically. Uniform rules and business practices reduce transaction costs and limit opportunities for institutional arbitrage, increase the extent of the market, and increase market liquidity and investment. In fact, the goal of unleashing market incentives for transmission investment is prominent in the SMD, and that goal is correct and crucial for continued dynamism and value creation in the electricity industry.