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Robert G. Ethier Market Monitoring

A Review of the Monitoring of Market Power: Discussion. March 18, 2005. Robert G. Ethier Market Monitoring. Some Observations on the Survey of Metrics/Tools. Many are remarkably simple Idiosyncratic markets may have unique tools

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Robert G. Ethier Market Monitoring

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  1. A Review of the Monitoring of Market Power: Discussion March 18, 2005 Robert G. Ethier Market Monitoring

  2. Some Observations on the Survey of Metrics/Tools • Many are remarkably simple • Idiosyncratic markets may have unique tools • Is there a greater role for more sophisticated analysis and modeling? • Need to figure out how to involve more academics; data access an issue • Metrics must be used with care with policymakers • HHI’s are popular, but of limited usefulness • Benchmark models are easy to understand and seem to answer the right question, but have unknown error bands and widely varying methodologies • Mitigation can be remarkably infrequent even in load pockets, with the right rules • What is the “right” allowable mark-up?

  3. What Does (and Should) an RTO Market Monitor Do? • Mitigation / Enforcement • Analysis • Market Design • Information provision and explanation • Detailed market and system operations evaluation • Oversight of transmission operations and investment?

  4. The Market Monitor as Cop • Market Power Mitigation gets all the attention • Generators see as cause of bankruptcies • New England experience suggests mitigation is not the cause, incomplete market design is • FERC concerned about delegation of authority and exercise of discretion by Market Monitors • Market Monitoring NOPR forthcoming? • However, Review abstract states, “ The discretion required for effective Market Monitoring is facilitated by institutional independence.” • FERC likely to claim a larger role here

  5. If Not a Cop, then an Analyst? • Effort required to execute market power mitigation has decreased over time • Rules have stabilized, systems improved • Analysis, design, and information demands have increased • Data access and resource availability make Market Monitors well suited to these roles • Essential for complicated marketplace. • Resource constraints and distance from data and operations make regulators less suited for this role

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