Effective monitoring and mitigation in the organized wholesale electric power markets |
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Authors: | Jeffrey Mayes Howard Haas Joseph Bowring |
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Institution: | 1. Monitoring Analytics, LLC, Eagleville, PA, USA
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Abstract: | The organized wholesale electric power markets in the United States are characterized by structural market power, and would
not produce competitive results absent administrative intervention. Market power mitigation is a fundamental and permanent
part of the market design for the organized wholesale electricity markets. Market power mitigation is essential to FERC’s
policy of relying on competition to regulate electric wholesale power prices, consistent with its mandate under the Federal
Power Act. Controversy has arisen about how to ensure that the markets clear on the basis of offers that have been determined
to be competitive. Specifically, the issue is what institution and function is best situated to provide the initial critical
determination about whether a participant’s offer is competitive. Despite recent clarification of FERC policies on the market
monitoring function, the roles of market administrators and market monitors are a potential source of confusion and counterproductive
institutional conflict. The FERC should refine and clarify its policy in this area by according exclusive responsibility to
institutional, independent market monitors to monitor participants’ conduct and the potential for the exercise of market power
through ex ante review of cost-based offers used in market power mitigation, subject to review by FERC. |
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