Discriminatory auctions promote strategic bidding and market manipulation.
Susan Tierney, PhD (stierney@analysisgroup.com), is managing principal of the Analysis Group, and formerly was assistant secretary of policy at the U.S. Department of Energy, and a commissioner on the Massachusetts Department of Public Utilities. Todd Schatzki, PhD (tschatzki@analysisgroup.com), is manager of the Analysis Group. Rana Mukerji (rmukerji@nyiso.com) is vice president-market structures, with the New York ISO.
Electricity prices are rising. These price increases coincide with policy changes in many parts of the country that introduced into the electric industry greater reliance on market forces. Although today’s electricity prices still are relatively low in historical terms (about two-thirds of their 1980s levels when adjusted for inflation1) and rising electricity prices have been largely the result of movements in global markets for fossil fuels, these price increases nonetheless have placed pressure on policy makers in a number of recently restructured electricity markets to question whether power prices have increased due to the design of competitive markets. Some observers have begun to push for redesign of market rules or even a return to elements of traditional cost-of-service regulation in the electric industry.2