For about ten years the European Commission has been discussing issues regarding the internal energy market, in particular the liberalisation of the electricity supply industry. The objective is to establish the internal energy market which should cover both the European ESI as well as the natural gas market. Under the "modern school of thinking" electric utilities are increasingly considered to be market actors like any others, but with possibly a special role to play in terms of the general public interest. The Austrian electricity system is heavily hydro-based and, therefore, very capital intensive. With the upcoming introduction of competition in electricity markets there will be a greater need for risk management and more contractual relations among the "players" in the industry. Electricity trading can be expected to increase substantially. The paper concludes that: · Electricity supply has for long been an industry where security of supply and fuel choice were political decisions. Despatching was conducted on something like a least-cost basis but there was no independent check by the market to guarantee this. In a deregulated market, however, economics will dictate both investment and despatching decisions. · In a competitive environment, the planning objective is a maximisation of profit. For a purely hydraulic system, this is equivalent to the maximisation of revenue as the generation costs, that are variable within the unit commitment planning horizon, can be neglected. A prerequisite for revenue maximisation is the forecast of the prices and the variation of the prices with the trading actions Verbund takes. · In a liberalised electricity market environment, a decision support for unit commitment and trading can be provided by joint operational optimisation of Verbund's generation system and its business partners and competitor's electricity procurement costs. · Contracts will play an important role in apportioning the risk between buyer and seller.
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