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2009 State of the Market Report

Market Performance

congestion or other price movements in the day-ahead market will cause prices to diverge from real-time prices and will be unprofitable. For example, a participant may submit a high-priced virtual bid at a constrained location that causes artificial congestion in the day-ahead market. The participant will buy in the day-ahead at the high (congested) price and sell the energy back at a lower (uncongested) price in the real-time market. Although it is foreseeable that the virtual transaction would be unprofitable, the participant could earn net profits if it increases its FTR payments (or payments through some other leveraged bilateral position) resulting from the increased day-ahead congestion. Virtual losses that warrant further investigation have been rare, although one pattern of losses did indicate conduct that warranted mitigation under the Tariff and the participant was mitigated accordingly.

To examine how the profitability of virtual transactions varies by type of location, Figure 22 shows the monthly average profitability of virtual purchases and sales at the Cinergy Hub, other hubs, and other nodes. The trading volume is shown by the diamonds in the figure that are plotted against the axis on the right side of the figure. The figure shows that Cinergy Hub is the single most liquid trading point in the Midwest ISO with almost 30 percent of all trading volume. Most other virtual trading activity occurs at individual nodes – over 60 percent in 2009.

Figure 22: Virtual Profitability by Location 2009

Gross Profitability ($/MWh)





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J F MAM J J A S ON D Cinergy Hub

J F MAM J J A S O ND Other Hubs

Virtual Demand Profitability Virtual Supply Profitability Share of Cleared

J FMAM J J A S OND Non-Hub Nodes





Share of Cleared Virtuals (MW)

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