The current recovery in global power-sector investment is being driven not only by rising demand for power, but also by the huge levels of liquidity in global financial markets. How long will the...
Fingerprinting the Invisible Hands
Opaque markets inflate power prices.
competitors, the exercise of market power wouldn’t be obvious to competitors without another round of experimentation with their own bids.
The lack of competitive information would reward the exercise of market power since the experimentation process by its competitors necessarily takes time. In the extreme example above, any market participant with market power could count on a substantial period of higher prices, while its competitors tried alternative bidding strategies and finally derived their competitor’s market price.
ERCOT publishes bids in 60 days. Bids in the other U.S. RTOs are released after 180 days. Within this time period, market participants with market power have an incentive to raise prices above marginal cost since any market response will be delayed by the time for other market participants to feel out their new bids. In Texas, Docket 31972 addressed this specific issue. In its August 23, 2006 decision, the Texas PUC found:
In balancing the concerns of the commenters on both sides of this issue, the commission has determined that it would be appropriate to change the disclosure requirement on a gradual basis. This will enable both the commission and the market participants to become accustomed to the new disclosure procedure and make any necessary changes to their operations. The implementation schedule for disclosure is also being tied to the schedule for increases to the offer cap, thereby further emphasizing the commission’s decision that these two issues are interrelated. Under the revised disclosure schedule contained in the rule, effective March 1, 2007, most of the required disaggregated information will be disclosed 90 days after the day for which the information was accumulated. This is one-half of the current disclosure timeframe of 180 days, but much longer than the 48- hour to 30-day time periods contained in the proposed rule. On the same date, the offer cap contained in the rule will increase from $1,000 per MWh to $1,500 per MWh. Effective March 1, 2008, the disclosure of disaggregated information will take place 60 days after the date the information was accumulated. This corresponds to the date that the offer cap is increased to $2,250 per MWh. Finally, two months after the market begins operation under a nodal market design (approximately March 1, 2009), the disclosure period is reduced to 30 days while the offer cap is raised to $3,000 per MWh. 8
This order was litigated extensively and eventually was replaced with a 60-day delay on the release of bidding data:
However, the commission is also sympathetic to the concerns expressed by Constellation that the time period before disclosure should be long enough to avoid encouraging collusion or other market manipulative activities. Except for intervals when an event trigger is reached, the commission agrees that, for most of the information subject to the rule, disclosure after 30 days may not be necessary. Therefore, while the commission cannot agree with the 90-day delay as proposed by Constellation, the commission determines that the appropriate delay for disclosure of individual offer curves, except when the event trigger is implemented, should be 60 days. The commission finds that this