ISO PublicISO PUBLIC
Analysis of system level market
power
Amelia Blanke
Manager, Monitoring & Reporting
Department of Market Monitoring
Market Surveillance Committee Meeting
General Session
June 7, 2019
ISO Public
DMM analysis of structural market power
Page 2
Comments on CAISO’s Analysis of Structural System-Level Competiveness,
Department of Market Monitoring, May 20, 2019
http://www.caiso.com/Documents/DMMComments-SystemMarketPowerAnalysis.pdf
Hours with RSI < 1 (2018)
With
virtual supply
Without
virtual supply
Input bids
Transmission losses
Self-scheduled exports
A/S bids without energy bids No No
Virtual supply No
RSI 1 < 1 5 34
RSI 2 < 1 18 100
RSI 3 < 1 45 305
A/S bids without energy removed
ISO Public
DMM analysis of structural market power updated to
include ancillary service bid segments without
overlapping energy bids.
Page 3
With
virtual supply
Without
virtual supply
With
virtual supply
Without virtual
supply
Input bids
Transmission losses
Self-scheduled exports
A/S bids without energy bids No No
Virtual supply No No
RSI 1 < 1 5 34 5 31
RSI 2 < 1 18 100 17 91
RSI 3 < 1 45 305 43 272
A/S bids without energy removed A/S bids without energy not removed
Hours with RSI < 1 (2018)
ISO Public
Average net cleared virtual bids in 2018
Page 4
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
MW
Virtual supply (cleared) Virtual supply (offered) Virtual demand (cleared)
Virtual demand (offered) Net virtual (cleared)
ISO Public
Analysis of uncompetitively high priced supply
and “almost” self-scheduled exports.
Average hourly MW of high price supply and exports
during 272 hours with RSI3 < 1
Page 5
High priced Total high priced
Bid price range
Import
energyGas PDR/RDR Import AS Total supply
exports (MW) supply + exports
$1000 to $990 404 67 58 17 545 198 744
$1000 to $750 614 137 71 17 839 232 1,071
$1000 to $590 665 146 118 17 946 264 1,210
High priced supply (MW)
ISO Public
Market competitiveness – 2018 Annual Report
• CAISO’s energy markets were generally competitive in 2018.
• Prices in the day-ahead market were significantly in excess of
competitive levels in some hours when net load that must be
met by gas-fired units is highest.
• Market for capacity needed to meet local requirements is
structurally uncompetitive in all local areas.
Page 6
2018 Annual Report on Market Issues and Performance, DMM.
http://www.caiso.com/Documents/2018AnnualReportonMarketIss
uesandPerformance.pdf
ISO Public
Net sellers supply bids vs. default energy bids for gas
units (July 24, 2018 hour 20).
Page 7
-$200
-$100
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000
Price
($
/MW
h)
Cumulative incremental MW
Day-ahead bid price
Default energy bids
ISO Public
Net buyers supply bids vs. default energy bids for gas
units (July 24, 2018 hour 20).
Page 8
-$200
-$100
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
Price
($
/MW
h)
Cumulative incremental MW
Day-ahead bid price
Default energy bids
ISO Public
Price-cost markup based on system marginal prices
with cost-based bids for gas units (2018)
Page 9
$10
$20
$30
$40
$50
$60
$70
$80
$90
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Lo
ad
-we
igh
ted
ave
rag
e p
ric
e (
$/M
Wh
)
System marginal energy cost
Base-case
Competitive scenario (gas at minimum of DEB, bid-price)
ISO Public
Average hourly price-cost markup is highest in evening
ramping hours (HE 17-21).
Page 10
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Price
-co
st-
ma
rkup
($
/MW
h)
2017 2018
ISO Public
Duration curve of highest hourly price-cost markups
Page 11
$0
$20
$40
$60
$80
$100
$120
$140
0 50 100 150 200
Pri
ce
-co
st
ma
rku
p (
$/M
Wh
)
Hours
2018 price-cost markup ($/MWh)
2017 price-cost markup ($/MWh)
ISO Public
Markup based on highest cost gas-fired unit dispatched
each hour in day-ahead market (2017-2018).
Page 12
$0
$100
$200
$300
$400
$500
$600
$700
0 50 100 150 200
Pri
ce
-co
st
ma
rku
p (
$/M
Wh
)
Hours
2018 Price-cost markup ($/MWh)
2017 Price-cost markup ($/MWh)
ISO Public
Comparison of competitive baseline price with day-
ahead prices (using day-ahead market software).
Page 13
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2017 2018
Ave
rag
e p
ric
e (
$/M
Wh
)
Competitive scenario - gas at DEBs
Average load-weighted day-ahead price
Average load-weighted base case price
ISO Public
System market power recommendations (2017 – 2018)
• ISO should begin to consider various actions that might be taken to
reduce/mitigate potential system market power.
• DMM recognizes that this recommendation involves major market design
and policy issues, including the possible development of new market design
options to mitigate potential system market power.
• DMM recognizes that the competitiveness of the ISO’s markets is heavily
affected by the procurement decisions of the state’s load-serving entities
and policies of their local regulatory authorities.
• Because of the potential severity of the impact of market power, DMM
made this recommendation at this time so that the ISO, stakeholders and
regulatory entities can give thorough consideration to this issue and
potential options to address it.
Page 14
ISO Public
Potential measures to reduce the potential for or
mitigate the effect of system market power:
• Begin consideration of options for system market power mitigation.
• Set local and system resource adequacy requirements sufficiently high to ensure
reliability (which may also reduced likelihood of non-competitive market outcomes).
• Reexamine resource adequacy provisions relating to imports (e.g. must offer obligation
in day-ahead only, resource or system backing RA imports, etc.)
• Strengthen the penalties and the enforcement of the penalties for must-offer obligations.
• Carefully track and seek to limit out-of-market purchases of imports at above-market
prices, which can encourage economic and physical withholding of available imports.
• Closely monitor for potential errors or software issues affecting market power mitigation.
Page 15