This timely study evaluates four generic proposals for allowing free market forces to replace government regulation in the electric power industry and concludes that none of the deregulation alternatives considered represents a panacea for the performance failures associated with things as they are now. It proposes a balanced program of regulatory reform and deregulation that promises to improve industry performance in the short run, resolve uncertainties about the costs and benefits of deregulation, and positions the industry for more extensive deregulation in the long run should interim experimentation with deregulation, structural, and regulatory reforms make it desirable. The book integrates modern microeconomic theory with a comprehensive analysis of the economic, technical, and institutional characteristics of modern electrical power systems. It emphasizes that casual analogies to successful deregulation efforts in other sectors of the economy are an inadequate and potentially misleading basis for public policy in the electric power industry, which has economic and technical characteristics that are quite different from those in other deregulated industries. "This is by far the best treatment of regulatory policy in the electric utility industry. The book succeeds in its analysis of deregulation proposals by sticking closely to economic principles, and avoiding the tiresome polemics associated with debates over competition versus government. control .... Particularly interesting and novel is [the authors'] discussion of the potential for competition in power generation. The book is also noteworthy for its style dispassionate and closely reasoned, yet easily accessible, to the generalist."- Robert Weiner, "Journal of Policy Analysis and Management" & quot; This is by far the best treatment of regulatory policy in the electric utility industry. The book succeeds in its analysis of deregulation proposals by sticking closely to economic principles, and avoiding the tiresome polemics associated with debates over competition versus government. control .... Particularly interesting and novel is [the authors'] discussion of the potential for competition in power generation. The book is also noteworthy for its style dispassionate and closely reasoned, yet easily accessible, to the generalist.& quot; - Robert Weiner, Journal of Policy Analysis and Management " This is by far the best treatment of regulatory policy in the electric utility industry. The book succeeds in its analysis of deregulation proposals by sticking closely to economic principles, and avoiding the tiresome polemics associated with debates over competition versus government. control .... Particularly interesting and novel is [the authors'] discussion of the potential for competition in power generation. The book is also noteworthy for its style dispassionate and closely reasoned, yet easily accessible, to the generalist." - Robert Weiner, "Journal of Policy Analysis and Management" - Robert Weiner, "Journal of Policy Analysis and Management" Paul L. Joskow is Professor of Economics at MIT. Richard L. Schmalensee is John C. Head III Dean and Professor of Management and Economics at the MIT Sloan School of Management. He is co-editor of Management: Inventing and Delivering Its Future (MIT Press, 2003).