Fortnightly Magazine - January 15 2003

Avoiding Overpriced Risk Management: Exploring the Cyber Auction Alternative

Should an LDC procure electricity hedge products by using an Internet-based auction?

Should an LDC procure electricity hedge products by using an Internet-based auction?

We propose that local distribution companies (LDCs) should use an Internet-based auction to procure inactively traded products, because the auction is a superior alternative to common procurement methods, such as bilateral negotiation and request for offers (RFO). Supporting our proposal is the empirical evidence from two auctions recently held by a municipal utility in Florida.

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