Bidder cost revelation in electric power auctions

Competitive auctions for electric power sources whose operation will be based upon economic dispatch raise new challenges for auction designers. The efficient selection and operation of such generation sources requires revelation of bidder types over two-dimensions, fixed and variable costs. The way in which fixed and variable prices are combined into a net score, which determines the winning bids, plays a key role in influencing bidders behavior. This paper analyzes bidder strategies and develops necessary conditions of bid scoring systems for the existence of equilibrium strategies that will result in efficient operations. Existing and proposed bid scoring systems are examined using our results.