Electric bills have become sharply higher and more volatile in certain restructured states, and voters are increasingly asking who is responsible for controlling the price they pay for power. In healthy commodity markets, long-term forward bilateral trading markets with many buyers and sellers negotiating mutually agreeable terms work alongside the central short-term spot market to insulate consumers from its price swings. Unfortunately, this price insulation (hedging) is largely absent from Northeastern wholesale capacity markets today. This report will attempt to offer both an explanation for a lack of price stabilization, and describe how states can fix it.

Now that high prices have caught policymakers’ attention, this is the right moment to revisit market structures built for the long-term health of restructured power markets. With wholesale power markets facing rising political pressure, it matters more than ever that all parties share a common vision for reforms that produce a coherent long-term outcome for consumers and industry participants alike. This paper offers a vision and practical guide for policymakers who want to establish state overseen long-term bilateral contracting as a means of stabilizing customer bills.