Market Power and Market Manipulation

The potential for the exercise of market power in competitive electricity markets is an important problem that must be carefully addressed in every regional electricity market. When taking steps to increase the role of competition in electricity markets, it is essential to prevent the exercise of market power from producing inefficient market outcomes and large wealth transfers. On the other hand, it is also important to avoid misidentification of market power, since this can lead to policies that undermine reliability in the both the short-run and long-run and can preclude achieving the intended benefits from the introduction of competition.

Another important and related set of policies in competitive electricity markets are those relating to market manipulation, as distinct from the exercise of market power. A core question in the regulation of competitive power markets is what kind of conduct constitutes market manipulation and what are the appropriate criteria for identifying market manipulation?

The papers below discuss the appropriate criteria for identifying the exercise of market power, apply these concepts to evaluate the role of market power in the Western Power Crisis, discuss issues in applying market power mitigation in industry software, and also consider what constitutes market manipulation and how it can be identified.

James Bushnell, Scott M. Harvey, Benjamin F. Hobbs, "Opinion on System Market Power Mitigation," Market Surveillance Committee of the California ISO, November 5, 2019.

Scott Harvey "System Market Power Discussion," California ISO - Western Energy Imbalance Market, Market Surveillance Committee Meeting, Folsom CA, October 11,2019.

Chiara Lo Prete, William W. Hogan, Bingyuan Liu, and Jia Wang, "Cross Product Manipulation in Electricity Markets, Microstructure Models, and Asymmetric Information, Energy Journal September 2019.

Scott Harvey "System Market Power," California ISO, Market Surveillance Committee Meeting, Folsom CA, August 19,2019.

Chiara Lo Prete, William W. Hogan, Bingyuan Liu, and Jia Wang, "Cross Product Manipulation in Electricity Markets, Microstructure Models, and Asymmetric Information, January 2019.

Scott Harvey "Offer Price Mitigation in the Western EIM," California ISO, Market Surveillance Committee Meeting, Folsom CA, August 3, 2018 (revised).

Scott M. Harvey and Susan Pope, "Single Schedule Market Pricing issues, Module G: Market Power Mitigation," Prepared for the Ontario IESO, Toronto Ontario, June 29, 2017.

Scott M. Harvey and Susan Pope, "Single Schedule Market Pricing issues, Module G: Market Power Mitigation-Appendix-Conduct and Impact Tests of North American ISOs," Prepared for the Ontario IESO, Toronto Ontario, June 29, 2017.

Scott Harvey, "Market Manipulation and Demand Response," Rutgers Center for Research in Regulated Industries, 28th Annual Westtern Conference, June 22, 2015

James Bushnell, Scott M. Harvey, Benjamin F. Hobbs, Shmuel S. Oren, "Opinion on LMPM Implementation in the Energy Imbalance Market," Market Surveillance Committee of the California ISO, July 7, 2014.

William W. Hogan, "Refund of Refunds," April 7, 2014

William W. Hogan, "Electricity Market Design Flaws and Market Manipulation," February 3, 2014.

William W. Hogan, "Electricity Market Design: Energy Trading and Manipulation" October 29. 2013

James Bushnell, Scott M. Harvey, Benjamin F. Hobbs, Shmuel S. Oren, "Report on the Appropriateness of the Three Pivotal Suppliers Test and Alternative Competitive Screens," June 27, 2013, filed with FERC in docket ER12-423-000.

William W. Hogan, "Multiple Market-Clearing Prices, Electricity Market Design and Price Manipulation," Electricity Journal, May 2012.

Scott Harvey, James Bushnell, Benjamin Hobbs, Members of the Market Surveillance Committee of the California ISO, "Opinion on Local Market Power Mitigation and Dynamic Competitive Path Assessment," Market Surveillance Committee of the California ISO, July 1, 2011.

Scott M. Harvey and William W. Hogan. "McCullough's Critique of the New York Electricity Market," Prepared for the New York ISO, December 22, 2009.

William W. Hogan and Ross Baldick, "Stability of Supply Function Equilibria: Implications for Daily versus Hourly Bids in a Poolco Market," Journal of Regulatory Economics, Vol. 30, No. 2, August 2006.

Scott M. Harvey and William W. Hogan, "Empirical Analysis of the Exercise of Market Power in California Electricity Markets," International Industrial Organization Conference, Industrial Organization Society, Atlanta Georgia, April 9, 2005.

Ross Baldick and William W. Hogan, "Polynomial Approximations and Supply Function Equilibrium Stability," August 27, 2004.

Scott M. Harvey, William W. Hogan and Todd Schatzki, "A Hazard Rate Analysis of Mirant's Generating Plant Outages in California," January 2, 2004.

Data for Hazard Rate Analysis Paper

Scott M. Harvey and William W. Hogan, "Comments Docket EL01-118- Market Rules & Market Based Rates," August 18, 2003.

Scott M. Harvey and William W. Hogan, "Mitigating Locational Market Power,"PJM Local Market Power Mitigation Working Group, Wilmington, Delaware, January 21, 2003.

Scott M. Harvey and William W. Hogan, "Market Power and Market Simulations," July 16, 2002.

Data and dispatch model to run simulations. File includes instructions.

Scott M. Harvey and William W. Hogan, "Identifying the Exercise of Market Power in California," December 28, 2001.

Ross Baldick and William Hogan, "Capacity Constrained Supply Function Equilibrium Models of Electricity markets: Stability, Non-decreasing Constraints and Function Space Iterations," December 18, 2001.

Scott M. Harvey and William W. Hogan, "Market Power and Withholding," December 20, 2001 filed in FERC Docket No. EL-01-118-000,

Scott M. Harvey and William W. Hogan, "Further Analysis of the Exercise of Market Power in the California Electricity Market," November 21, 2001.