This paper addresses the issue of regulation versus deregulation in view of a theoretical basis provided by the Lagrangian dual optimization principles. The paper shows that dual prices, as compared with primal costs, tend to be lower in low-load periods, but rise to much higher values in peak periods. Thus, theoretically, deregulation based on dual optimization principles leads to a higher cost of energy for the consumer. As compared with the regulated operation or with deregulated operation based on primal optimization principles such as bilateral contracts.
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