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2009 State of the Market Report

Competitive Assessment

Figure 72: Market Shares and Market Concentration by Region 2009

Market Share as a Percent of Total Supply

100% 90% 80%

3rd Largest Supplier 2nd Largest Supplier Largest Supplier

70% 60%

50%

Midwest ISO

Central

East

West

WUMS

HHI: 532

1,807

1,950

1,685

2,382

40% 30% 20%

10% 0%

The HHI in the entire Midwest ISO area of operation is 532, which is low and indicative of a competitive market. The largest three suppliers combined have a total market share of less than 30 percent. This metric indicates that generation ownership in the Midwest ISO as a whole is not concentrated. Each of the four regions is much more concentrated than the Midwest ISO as a whole. The East region and WUMS area are highly concentrated: the top three suppliers control over 70 percent of the market in both of these regions. Investment has reduced the HHI from 2,089 to 1,685 in the West. The regional HHIs are higher than those in the comparable zones of other RTOs because vertically-integrated utilities in the Midwest ISO that have not divested generation tend to have substantial market shares. Divestitures of generation in other RTO zones generally reduce market concentration because the assets are typically sold to a number of smaller entities.

2.

Residual Demand Index

As noted above, the HHI market concentration calculation is a commonly used measure of market power. However, the HHI does not allow one to draw reliable inferences regarding the

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