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2009 State of the Market Report

Competitive Assessment

competitiveness of electricity markets because it ignores factors particularly relevant to the study of power markets. The next two analyses more accurately reveal potential competitive concerns in the Midwest ISO energy markets.

The first metric is the Residual Demand Index (“RDI”), which measures the portion of the load in an area that can be satisfied without the resources of its largest supplier. The RDI is calculated using all import capability into the area, not just the imports actually scheduled. In general, the RDI decreases as load increases. An RDI greater than 1 means that the load can be satisfied without the largest supplier’s resources. An RDI less than 1 indicates that a supplier is “pivotal” and a monopolist over a portion of the load. Figure 73 shows the portion of total hours with a pivotal supplier by region and load level, measuring the percentage of hours when the RDI is less than one. The percentages shown below the x-axis indicate the percent of hours falling into each load-level tranche.

Fraction of Hours with Pivotal Supplier

Up to 60

60 to 70

70 to 80

80 to 90

90 to 100 Up to 60

60 to 70

70 to 80

80 to 90

90 to 100

34.5%

38.0%

21.8%

4.8%

1.2% 52.3%

33.8%

11.7%

1.9%

0.3%

2008

2009

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Figure 73: Pivotal Supplier Frequency by Load Level 2008 – 2009

MISO Central East West WUMS

As expected, the frequency with which a supplier is pivotal rises sharply as load rises. Furthermore, prices are most sensitive to withholding under high load conditions, which explains why market power concerns are the greatest when load is highest. The figure shows a substantial

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