2009 State of the Market Report
The data in the figures do not raise substantial competitive concerns. In the Central and East regions, deratings and short-term forced outage rates are slightly lower for the largest two suppliers than for all other suppliers. In the WUMS and West regions, deratings and outages are comparable across all load levels (generally ranging from 8 to 13 percent). While short-term forced outage rates are higher for the top suppliers in these regions at the higher load levels, the combined outage rates are lower. Overall, short-term outages were less prevalent in 2009 than in 2008. Although these results do not raise competitive concerns, we continue to investigate any outages or deratings that create substantial congestion or other price effects.
Market Power Mitigation
In this subsection, we examine the frequency with which market power mitigation measures were imposed in the Midwest ISO markets. The mitigation measures are contained in Module D of the Midwest ISO’s Tariff. They are intended to preclude abuses of locational market power while minimizing interference with the market when the market is workably competitive. The Midwest ISO only imposes mitigation measures when suppliers’ conduct exceeds well-defined conduct thresholds and when the effect of that conduct on market outcomes exceeds well- defined market impact thresholds. By applying these conduct and impact tests, the mitigation measures are designed to allow prices to rise efficiently to reflect legitimate supply shortages, while effectively mitigating inflated prices associated with artificial shortages that result from physical or economic withholding in transmission-constrained areas. The Midwest ISO has almost completely automated the mitigation process.
Market participants are subject to potential mitigation specifically when transmission constraints that are binding can result in substantial locational market power. When a transmission constraint is binding, one or more suppliers may be in a position to exercise market power due to a lack of competitive alternatives. As discussed previously, the mitigation thresholds differ based on the two types of constrained areas that may be subject to mitigation: BCAs and NCAs.
Because the market power concerns associated with NCAs are higher due to their chronic nature, the conduct and impact thresholds for NCAs are substantially lower than they are for BCAs. The chronic nature of the NCAs and the lower mitigation thresholds generally lead to more frequent