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2009 State of the Market Report

Competitive Assessment

The previous analysis focused on mitigation of economic withholding in the real-time energy market. Participants can also exercise market power by raising their offers when their resources must be committed to resolve a constraint or to satisfy a local reliability requirement. This can compel the Midwest ISO to make substantially higher RSG payments. The Midwest ISO designed mitigation measures to address this conduct. These mitigation measures are triggered when the following three criteria are met: 1) the unit must be committed for a constraint or a local reliability issue; 2) the unit’s offer must exceed the conduct threshold; and 3) the effect of the inflated offer must exceed the RSG impact threshold (i.e., to raise the unit’s RSG payment by $50 per MWh). Figure 87 shows the frequency and amount by which RSG payments were mitigated in each month of 2008 and 2009.

Figure 87: Real-Time RSG Payment Mitigation by Month 2008 – 2009

RSG Mitigation Dollars

$200,000 $180,000 $160,000 $140,000

$120,000 $100,000 $80,000 $60,000 $40,000 $20,000

Dollars Unit-Days

10 9 8 7

6 5 4 3 2 1

Mitigated Unit-Days

$0

0

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

RSG mitigation occurred for 30 unit-days in 2009, up from 7 in 2008. However, the dollar amount mitigated dropped by 65 percent to $96,000. Since RSG payments are a function of both as-bid production costs and LMPs, lower fuel and energy prices in 2009 led to a reduction in the dollar amount mitigated. These figures remain substantially below the totals for prior years.

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