Market gaming and market power mitigation in deregulated electricity markets

Abstract

Market gaming is a daily routine in a deregulated electricity market. It has been reported extensively that producers have been gaming in the England and Wales power market ever since the market was deregulated. In June 1998, wholesale electricity prices settled at $7000/MWh in the Midwest US market. The replacement power prices settled at $9999/MWh on July 13, 1998 in the newly formulated California Power Exchange. Market power abuses have caught the concern and attention of the Federal Energy Regulatory Commission, state regulatory commissions, and consumer groups. This paper examines different forms of electricity market power abuses and suggests mitigation strategies to minimize the effect of market power on the fledgling competitive markets in the US.