Invited Presentations Alternative Auction Institutions for Electric Power Markets

Restructuring of electric power markets is proceeding across the United States and in many other nations around the world. The performance of these markets will influence everything from the prices faced by consumers to the reliability of the systems. The challenges of these changes present many important areas for research. For much of the northeastern United States, restructuring proposals include, at least for the short term, the formation of a single-sided auction mechanism for the wholesate market. This research uses experimental methods to analyze how these markets may function. In the experiments, the two basic uniform price auction rules are tested under three different market sizes. Early experimental results suggest the commonly proposed last-accepted-offer auction works well, but market power could be a real concern. Restructuring of electric power markets is proceed-ing across the United States and in many other nations around the world. For much of the north-eastern United States, restructuring proposals in-clude, at least for the short term, the formation of a single-sided auction mechanism for the whole-sale generation market. The performance of these auction markets will influence everything from the prices faced by consumers to the reliability of the systems. This paper reports on research examining poten-tial auction institutions for restructured markets for electric power through a series of economic experi-ments. 1 The primary factors for analysis in this research were efficiency and pricing. The potential for owners of electric generators to achieve market power was a major focus as well. The secondary concern in the experiments was to compare the induced cost curves and the actual offer curves in an effort to determine if strategic supply reduction should be a concern, The setting of these experi-ments was designed to match as well as could b