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Power Grid versus Power Pool
The term Power Grid customarily refers to the electrical facilities that connect generation plants to end user loads as described above. The term Power Pool on the other hand refers to the philosophy, procedures, and the financial accounting that is applied to the pool participants. The New England Power Pool (NEPOOL) was established in 1971, for example, not only to improve delivery reliability but also to reduce the cost of electricity to the customers of the New England investor-owned electric utilities.

Power Pool
Pool participants are required to submit to having their individual generators dispatched by a central dispatcher. As an illustration, consider a power pool comprising four states, 20 electric utilities, and 1,000 individual generators (not the number of power plants but the number of generators). The fuel and labor cost of each generator is known to the dispatcher and ordered from lowest unit cost per kWh to highest. The dispatcher directs its member utility pool participants to turn on and turn off generators, generally in the priority of lowest unit cost to highest. The member pool participant utilities have no authority to override the dispatcher's directives.

Cost Allocation
After the fact, for each hour of the day, two calculations are made:


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