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NPRR-574

NPRR-574. Raiden Commodities LP Patrick de Man WMS 11/13/2013. GenXYZ Modifying Offer Curves. Strategically executed for self-benefit Appears random to the market At least on 15 days during the summer Without any economic rationale Generally, conditions are: High load days

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NPRR-574

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  1. NPRR-574 Raiden Commodities LP Patrick de Man WMS 11/13/2013

  2. GenXYZ Modifying Offer Curves • Strategically executed for self-benefit • Appears random to the market • At least on 15 days during the summer • Without any economic rationale • Generally, conditions are: • High load days • SCED tight ~2,000

  3. Offer Curve Modification Example • All available units of this QSE (including Lignite): similar modifications • What market conditions changed to warrant this modification? • Pricing out of the market: down-balancing when LMP<$4900 • In normal world this would be called Economic Withholding1) • However, this QSE is in the clear because of the “Small Fish Swim Free” rule • Impacts: • Pushing LMP clear higher • ICE HB_NORTH BalDay and Next Day contract (HE7-22) trading higher • Forward contracts: e.g. Summer 2014 trading up 1) In ERCOT it was too, at least up to 2007: Report on Investigation of the Wholesale Market Activities of TXU from June 1 to September 30, 2005, Potomac Economics, Ltd., ERCOT Independent Market Monitor, March 2007

  4. Examples • July 12, 2013 (7 units) • GenXYZ bought several thousand MW HB_HOUSTON in DAM for HE16 – H18 • Offer curve changes for HE16 – HE18 • $77 print in attempt to gain on DAM position • August 12, 2013 (11 units) • Curve change at 15:00 = price spike $889 • Look-Ahead holds at $4900 for the hour • Confusion in futures market. Trading up to $130 only to settle $48 • September 3, 2013 (6 units) • Jack County tripped (615MW 3:30pm + 615MW 4.30pm) • Curve Change 16:00 = price spike $365 • GenXYZ set the LMP clearing price for 4 intervals: $4900; HE7-22 cleared $199 • Also on: 6/12 (5), 6/13 (7), 6/20 (5), 6/27 (5), 6/28 (7), 6/29 (9), 7/3 (5), 7/16 (6), 7/18 (7), 7/23 (12), 7/31 (4), 8/7 (12), 8/13 (12), 8/23 (10) • How is this a competitive and efficient market? • Obviously, assumptions underlying “Small Fish” rule are flawed

  5. Summary • After witnessing summer’s horror show: something is broken here • Clearing firms: • Spooked by ERCOT (fake) volatility: looking to exit ERCOT products • Increasing margins significantly in all power markets, pushing small traders out of the market; liquidity drying up • Calpine proposed NPRR-321: identical language as NPRR-574 • But now: Big generators prefer status quo. Why? • Like in NEISO there should be some limitations and benchmarking • When are offer curve modifications acceptable? • Offer curve modification to reflect forward grid conditions is anti-competitive • “Small Fish” Rule flaw: if SCED is 2000, moving 1000MW is 50% of available capacity: you can control pricing

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