Benchmarks

New England's experience may redefine the term.

During the 1990s, capacity margins in the United States declined almost one third, falling from 21 percent in 1991 to less than 15 percent in 2001. In some regions, margins shrunk to less than 10 percent. Concerns grew over electricity reliability and possible upward pressures on electricity prices. However, as new gas-fired power plants began to come on line in the late 1990s, the developing electricity generation capacity surplus began to raise concerns.

The U.S. capacity margin growth of 2002 should have eased upward pressures on electricity prices. However, electricity prices surged in many areas, such as New England, where surplus electricity capacity has developed.

This suggests that the standard definition of capacity margin may not be appropriate in the context of current market realities.