the mysterious new york market

8/14/2019 The Mysterious New York Market

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The M st er iousNew York Mark e t

Robert McCullough

October 15, 2009


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t he New York ISO

Of the U.S.

New York ISO representsthe market with the mostdistorted bids on a dailyas s

Distorted bids occur in

both day ahead and hour

A large number ofbidders and generators areinvolved with as much as

10% of total supplyinvolved


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oc ey t c s Any bid whose higher segments

represent unrealistic prices Generally reflect price setting in

markets where the highest bid is

returned by the LP as the pricewhen all supply bids are

exhausted


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oc ey t c s Also used for economic

withholding May reflect computational

problems ERCOTs algorithm

tends to time out


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One of hundreds of

per hour

Generator #25855750 adds asmall increment to its bid curve at999

Obviously, the odds that$999/MWh actually represents costis very, very low

800

1000

1200

e sma ncremen s a ossto this generator since it seldomdispatches

200

400

600

$/MW

0

0 50 100 150 200 250 300

Megawatts/Hour


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The New York ISOReceives

Approx imate ly

2,000 Simi lar B ids A

Day

So far in March we have seen43,000 bids with segments priced

These correspond to 55different bidders, submitting bids

from many different unitsthat the bids just represent NewYork City


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The d ist r ibut ion o f

b ids inc ludes many

b ids a t spec i f ic

arb it ra ry -- p r ic es

$999/MWh is the secondmost common maximum bid,


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Ec onom ic t heor assures us that a l l

o f t hese b idders are

m ak ing a ser ious

m is take

In the presence of perfectcompetition, no bidder should

affect prices

If he systematically bids

above his marginal cost, he will notbe dis atched durin man eriodswhen the plant would be profitable

If he bids below marginalcost, he may be dispatched at aloss

Logically, all bidders bid atmarginal cost


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m ak ing a ser ious $1,200.00 DayAheadSupplyCurveFor2/1/20098:00A.M.

mis take

The significant amount ofmegawatts committed only above $800.00

$1,000.00

, , implies that a lot of bidders aremaking a lot of mistakes

$400.00

$600.00

$/MWh

$

$200.00

5,000.00 10,000.00 15,000.00 20,000.00 25,000.00

Megawatts/Hour


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m ak ing a ser ious$1,000.00

DayAheadSupplyCurveFor2/1/20098:00A.M.mis take

Here is the same chart usinglogs

$100.00

ou can see t e two c usters reasonable bids below$100/MWh, doubtful bids in the

$200-$300MWh range, andim robable bids above $300/MWh

$1.00

$10.00

5,000.00 10,000.00 15,000.00 20,000.00 25,000.00

$/MWh

$0.01

$0.10

Megawatts/Hour


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What about

m i t i ga t i on?

From the current NYISO state ofthe market report:

In certain constrained areas, mostof which are in the New York City

area, some suppliers have

resources are needed to managecongestion or satisfy local

reliability requirements. In thesecases, however, the market ower

mitigation measureseffectively limit their ability toexercise market power.

2008 SOM, page vii


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s t s w or ng e answer appears to e no

Since noneconomic bids are so pervasive, it is unlikely that the rulesdescribed by the ISO are mitigating 10% or more of total bids

Readin between the lines, it a ears that a lication of themitigation rules appears to be largely directed at New York City

In September, the ISO filed an emergency motion attempting totighten up mitigation rules in NYC, citing non-economic bids


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I f w e are so sm art

unders t and t hesebids?

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