Q7Restructured Power System

Power sector restructuring fundamentally involves unbundling the traditional vertically-integrated utility (which historically owned and operated generation, transmission and distribution all under one entity) into several separate, independent entities, each with a distinct commercial and/or regulatory function, to introduce competition where beneficial while retaining regulated monopoly treatment where natural monopoly characteristics (transmission and distribution wires) persist.

Generation Companies (GENCOs): independent, competing entities that own and operate power plants, competing with each other to sell electricity into the wholesale market (via bilateral contracts, power exchanges, or both), with generation being the segment most amenable to competitive restructuring since multiple generators can readily compete for the same customers.

Transmission Companies (TRANSCOs): entities that own and maintain the high-voltage transmission network, generally remaining a regulated monopoly (since building duplicate, competing transmission networks is economically wasteful), required to provide open, non-discriminatory access to all generators and load-serving entities wishing to use the network.

Independent System Operator (ISO) / Regional Transmission Organization (RTO): an independent entity (often not owning any generation or transmission assets itself) responsible for the real-time, secure and reliable operation of the transmission grid, coordinating generation dispatch, managing the wholesale energy and ancillary services markets, and impartially administering non-discriminatory transmission access for all market participants, kept structurally independent to prevent any single participant (particularly incumbent generators) from gaining unfair operational advantage.

Distribution Companies (DISCOMs): entities responsible for the local, lower-voltage distribution network delivering power to final retail consumers, also generally remaining a regulated monopoly at the local/regional level for similar natural-monopoly reasons as transmission, though retail supply/billing functions may in some restructured markets be separately opened to competition (retail choice).

Power Exchanges: organized trading platforms (spot markets) where generators and buyers can trade standardized electricity products (day-ahead, real-time, term-ahead contracts) transparently, providing price discovery and liquidity for the wholesale electricity market, exemplified in India by exchanges such as the Indian Energy Exchange (IEX).

Regulatory Commissions: independent regulatory bodies (such as the Central Electricity Regulatory Commission, CERC, and State Electricity Regulatory Commissions, SERCs, in India) that oversee the entire restructured market, setting transmission and distribution tariffs (for the segments remaining regulated monopolies), establishing market rules and codes of conduct, licensing market participants, and monitoring for market power abuse, ensuring the restructured market operates fairly, transparently and in the broader public interest even as competitive elements are introduced into generation and, in some markets, retail supply.