Introduction
The Electricity Pool of England and Wales was created on 31 March 1990 in readiness for privatisation of the electricity industry. It is a contractual arrangement entered into by Generators and Suppliers that provides the wholesale market mechanism for trading electricity. The Pool does not itself buy or sell electricity; those trading in the Pool do so against a defined set of rules. Compared with other traded commodities such as gold, coffee or crude oil, electricity poses two distinct challenges. Firstly it is not possible to store electricity in any significant quantity so there is a need to match instantaneous demand with instantaneous generation and secondly the inability to trace electricity from generator to customer. For these reasons, the wholesale market for trading electricity between generators and suppliers was based on a pooling arrangement. Generators sell electricity into a "pool" and suppliers purchase out of this pool. Participation in the market is through membership of the Pool under the Pooling and Settlement Agreement. As a consequence of the introduction of competition in supply, the amount of electricity purchases attributed to each Supplier must be calculated. This calculation is defined in the Pooling and Settlement Agreement.