Polar Vortexes in New England: Missing Money, Missing Markets, or Missing Regulation?

19 July 2020
By Dr. Jeff D. Makholm and Dr. Laura T. W. Olive

In recent years, extreme cold weather in New England, termed Polar Vortex events, reveal the difficult interaction between regulated natural gas markets and competition in wholesale electricity markets. In a peer-reviewed paper in Economics of Energy & Environmental Policy titled “Polar Vortexes in New England: Missing Money, Missing Markets, or Missing Regulation?” NERA Managing Director Dr. Jeff D. Makholm and Associate Director Dr. Laura T. W. Olive detail how each market deals with the risk of committing capital to serve a region with such extreme cold weather and explain the institutional problems that render solutions difficult.

Dr. Makholm and Dr. Olive conclude that the New England problem demonstrates the value for states to adopt a regional perspective. This perspective, empowering state regulators with the authority to devise a solution, would not only improve reliability, but also save electric customers billions of dollars.