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To benefit the WA community by promoting an efficient and customer focused economy 1
To benefit the WA community by promoting an efficient and customer focused economy 2
Bruce Layman Chief Economist Economic Regulation Authority To - - PowerPoint PPT Presentation
Bruce Layman Chief Economist Economic Regulation Authority To - - PowerPoint PPT Presentation
Bruce Layman Chief Economist Economic Regulation Authority To benefit the WA community by promoting an efficient and customer focused economy 1 WEM Market Rule 7A.2.17 a Market Participant must not, for any Trading Interval, offer prices in
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Market Power Mitigation in the WEM
- Consumer and Competition Law
- Electricity Market Regulation – Why?
- US Experience
- Market Rule 7A.2.17
- Proposed Changes
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To benefit the WA community by promoting an efficient and customer focused economy 4
Competition and Consumer Act (2010)
- s46: Misuse of Market Power
- s50: Mergers
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Differences
- CCA 2010
- Protecting competition
- Electricity Markets
- Reduce participants using market power –
e.g. withholding
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Competition and Consumer Act
- Substantial Market Power
- Ability to price without constraint from
competition
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Competition and Consumer Act
- Substantial Market Power
- Not transient
- Potential competition/ new entrants
relevant
- Two years [AGL v ACCC]
- LRMC
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S46: Competition and Consumer Act (2010)
- Take Advantage of
- Whether a “profit maximising firm operating
in a workably competitive market could in a commercial sense profitably engage in the behaviour” [ACCC v Cement Australia Pty Ltd ]
- Effects Test
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Electricity Markets
- Inelastic Demand
- Demand = Supply – always
- Short-term damage substantial
with long-term implications
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50 100 150 200 250 300 350 Jan-00 Feb-00 Mar-00 Apr-00 May-00 Jun-00 Jul-00 Aug-00 Sep-00 Oct-00 Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01 USD / Mwh
To benefit the WA community by promoting an efficient and customer focused economy 10
California Electricity Prices
17 Months
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Electricity Markets
- Inelastic Demand
- Demand = Supply
- Short-term damage substantial
- Capacity markets
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North America
- Structural (e.g. PJM)
- Conduct and Impact (e.g. MISO, NYISO)
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WEM Market Rule 7A.2.17
a Market Participant must not, for any Trading Interval, offer prices in its Balancing Submission in excess of the Market Participant’s reasonable expectation of the short run marginal cost of generating the relevant electricity by the Balancing Facility, when such behaviour relates to market power.
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Rule 7A.2.17 Interpretation
- CCA 2010
- Interpretation Act (WA)
- Market Objectives
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WEM Objectives
- Economic efficiency, safe and reliable
electricity production
- Encourage competition
- Avoid discrimination between technologies
- Minimise long-term cost to customers
- Encourage energy efficiency
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WEM Objectives
- Economic efficiency, safe and reliable
electricity production
- Encourage competition
- Avoid discrimination between technologies
- Minimise long-term cost to customers
- Encourage energy efficiency
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WEM Market Rule 7A.2.17
a Market Participant must not, for any Trading Interval, offer prices in its Balancing Submission in excess of the Market Participant’s reasonable expectation of the short run marginal cost of generating the relevant electricity by the Balancing Facility, when such behaviour relates to market power.
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Market Power
- No “Substantial”
- Rule capable of being applied to any
Trading Interval
- Refers to SRMC
- Rule can’t be toothless
- Other capacity markets
i.e. Short-term/transient covered
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WEM Market Rule 7A.2.17
a Market Participant must not, for any Trading Interval, offer prices in its Balancing Submission in excess of the Market Participant’s reasonable expectation of the short run marginal cost of generating the relevant electricity by the Balancing Facility, when such behaviour relates to market power.
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40.00 50.00 60.00 70.00 80.00 90.00 100.00 110.00 30 60 90
Marginal Cost Average Cost
$ / MWh
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Short-run Marginal Cost: Economics Textbook
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40.00 45.00 50.00 55.00 60.00 65.00 70.00 75.00 30 60 90
Marginal Cost Average Cost
$/MWh
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Short-run Marginal Cost: Electricity Generation
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Short-run Marginal Cost
- SRMC ~ AVC; or
- P > SRMC may not relate to
market power
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WEM Market Rule 7A.2.17
a Market Participant must not, for any Trading Interval, offer prices in its Balancing Submission in excess of the Market Participant’s reasonable expectation of the short run marginal cost of generating the relevant electricity by the Balancing Facility, when such behaviour relates to market power.
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Capacity Market
- Proposed steep demand curve
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