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2009 State of the Market Report

Competitive Assessment

year-over-year improvement in the competitive conditions of all regions. The total number of hours when a supplier was pivotal decreased by at least 70 percent in each region. No supplier was pivotal during any hour in the Central region or the Midwest ISO as a whole during 2009. Suppliers were rarely pivotal at load levels below 80 GW (97.8 percent of all hours). These improvements are likely due to increases in transmission capability and reduced congestion into many of these areas. Although the frequency was high in WUMS during the highest load hours, this only comprises 0.3 percent of all hours and does not pose a substantial concern. Additionally, WUMS is designated as an NCA and, thus, subject to tighter mitigation thresholds. In all, the figure shows a modest improvement in 2009 as a result of investments in generation, transmission, and lower overall load.


Constraint-Specific Pivotal Supplier Analysis

While the RDI pivotal supplier analysis in the prior subsection is useful for generally evaluating the competitiveness of the market, accurately identifying local market power requires a more detailed analysis that focuses on specific transmission constraints that can isolate locations on the transmission grid. The analyses in this subsection seek to detect potential local market power concerns by identifying when a supplier is pivotal relative to a particular transmission constraint.

A supplier is pivotal for a constraint when it has the resources to overload that constraint to an extent that all other suppliers combined cannot relieve the constraint. This is frequently the case for lower-voltage constraints because the resources that most affect the flow over the constraint are those that are near the constraint. If the same supplier owns all of these resources, this supplier is likely pivotal to maintaining reliability. Although overall congestion was modestly lower in 2009 compared to 2008, an increasing share of binding intervals occurred on low- voltage constraints.

We focus particular attention on the two types of constrained areas that are defined for purposes of market power mitigation: Broad Constrained Areas and Narrow Constrained Areas. The definition of BCAs and NCAs is based upon the electrical properties of the transmission network that can lead to local market power. NCAs are chronically-constrained areas where one or more suppliers are frequently pivotal. Hence, they can be defined in advance and are subject to tighter

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