New rule would align price settlements with real-time dispatch.
Bruce Radford is executive editor of Public Utilities Fortnightly. Contact him at Radford@fortnightly.com.
In his recent book Flash Boys, Michael Lewis, who previously authored Moneyball, Liar's Poker and The Big Short, reports on how high-frequency stock traders spook Wall Street.
"NOPR would require RTOs to settle energy transactions in real-time markets at the same interval by which they dispatch energy." – Bruce Radford
Lewis tells of a strategy called "front-running." Traders use private high-speed Internet connections plus monster computer algorithms to find out you're looking to buy a stock. Right away, in a matter of milliseconds, they place their own buy to move the market a tad higher. Then, just as fast, before you can catch your breath, they sell that stock back to you, at that fractionally higher price. Who knew?
Lewis explained it all in an interview with Steve Kroft, on the CBS news show 60 Minutes, about how a bunch of nerds working on their own time cracked the code. For more, see "The Wolf Hunters of Wall Street," New York Times Sunday Magazine, March 31, 2014.
Now we learn that front-running has its own analog in wholesale power markets. It's called "price chasing." And the Federal Energy Regulatory Commission, FERC, wants to pull the plug.