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2009 State of the Market Report

Competitive Assessment

Figure 76: Monthly Average Output Gap: Real-Time Market 2008 – 2009

Output Gap (MW)

1200

1000

800

600

400

200

0

Low Threshold High Threshold Share of Actual Load

2.00%

    • 1.80

      %

    • 1.60

      %

    • 1.40

      %

    • 1.20

      %

1.00%

    • 0.80

      %

    • 0.60

      %

    • 0.40

      %

    • 0.20

      %

0.00%

Share of Actual Load

07 08 09 J F M A M J J A S O N D J F M A M J J A S O N D

2008 2009 Low Threshold Results by Commitment Status (MW)

Off-Line

42

55

11

17

10

25

16

31

26

73

79

65

124

83

110

57

38

4

3

0

1

2

1

19

0

1

7

On-Line

548

242

199

289

213

194

203

244

373

250

257

273

189

181

235

394

381

305

331

296

176

84

96

81

84

77

85

93

102

31

35

35

47

91

89

112

130

102

84

146

126

222

66

57

35

7

44

41

18

4

56

16

1

26

1039

727

105

825

771

828

708

888

971

897

625

671

484

479

579

491

472

441

412

407

238

144

136

113

113

105

120

Off-Line On-Line

High Threshold Results by Commitment Status (MW)

The output gap continued to decline in 2009. Output gap levels were considerably lower in the second half of 2009 as a result of sustained low load levels and prices and surplus generation. These levels are relatively low and generally raise limited competitive concerns. However, we monitor these levels continually and have investigated many specific output gap issues. In nearly all cases, output gap can be explained by specific operating conditions and other competitive factors.

Despite the low output gap levels shown above, it is useful to make a further examination. Because any measure of potential withholding will inevitably include quantities that can be justified, we generally evaluate not only the absolute level of the output gap but also how it varies with factors that can cause a supplier to have market power. This allows us to test whether a participant’s conduct is consistent with attempts to exercise temporal market power. The most important factors in this type of analysis are the size of the participant and the load level. Larger suppliers generally are more likely to be pivotal and will tend to have a greater incentive to increase prices than relatively smaller suppliers. Load level is important because the sensitivity of price to withholding generally increases as the load increases. This is due, in part,

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