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A Review of ISO New England's Proposed Market Rules

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Abstract

This report reviews the proposed rules for restructured wholesale electricity markets in New England. We review the market rules, both individually and collectively, and identify potential problems that might limit the efficiency of these markets. We examine alternatives and identify the key tradeoffs among alternative designs. We believe that the wholesale electricity market in New England can begin on December 1, 1998. However, improvements are needed for long-run success. We have identified four major recommendations: 1. Switch to a multi-settlement system. 2. Introduce demand-side bidding. 3. Adopt location-based transmission congestion pricing, especially for the import/export interfaces. 4. Fix the pricing of the ten minute spinning reserves.

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File URL: http://www.cramton.umd.edu/papers1995-1999/98mdi-iso-ne-markets-review.pdf
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Bibliographic Info

Paper provided by University of Maryland, Department of Economics - Peter Cramton in its series Papers of Peter Cramton with number 98mdi.

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Length: 41 pages
Date of creation: 09 Sep 1998
Date of revision:
Handle: RePEc:pcc:pccumd:98mdi

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Postal: Economics Department, University of Maryland, College Park, MD 20742-7211
Phone: (202) 318-0520
Fax: (202) 318-0520
Web page: http://www.cramton.umd.edu

Related research

Keywords: Auctions; Multiple Object Auctions; Electricity Auctions;

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  1. Lawrence M. Ausubel & Peter Cramton, 1995. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Papers of Peter Cramton 98wpdr, University of Maryland, Department of Economics - Peter Cramton, revised 22 Jul 2002.
  2. Paul L. Joskow & Richard Schmalensee & Elizabeth M. Bailey, 1996. "Auction Design and the Market for Sulfur Dioxide Emissions," NBER Working Papers 5745, National Bureau of Economic Research, Inc.
  3. Green, R., 1996. "The Electricity Contract Market," Cambridge Working Papers in Economics 9616, Faculty of Economics, University of Cambridge.
  4. Green, Richard J & Newbery, David M, 1992. "Competition in the British Electricity Spot Market," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 929-53, October.
  5. Cramton Peter & Schwartz Jesse A, 2002. "Collusive Bidding in the FCC Spectrum Auctions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 1(1), pages 1-20, December.
  6. Cramton, Peter & Schwartz, Jesse A, 2000. "Collusive Bidding: Lessons from the FCC Spectrum Auctions," Journal of Regulatory Economics, Springer, vol. 17(3), pages 229-52, May.
  7. Green, Richard J, 1996. "Increasing Competition in the British Electricity Spot Market," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 205-16, June.
  8. Milgrom, Paul R & Weber, Robert J, 1982. "A Theory of Auctions and Competitive Bidding," Econometrica, Econometric Society, vol. 50(5), pages 1089-1122, September.
  9. Frank A. Wolak & Robert H. Patrick, 2001. "The Impact of Market Rules and Market Structure on the Price Determination Process in the England and Wales Electricity Market," NBER Working Papers 8248, National Bureau of Economic Research, Inc.
  10. Barker, Jr.J. & Tenenbaum, B. & Woolf, F., 1997. "Governance and Regulation of Power Pools and System Operators. An International Comparison," Papers 382, World Bank - Technical Papers.
  11. Bernard, John C. & Mount, Timothy D. & Schulze, William D., 1998. "Alternative Auction Institutions For Electric Power Markets," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 27(2), October.
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Cited by:
  1. Natalia Fabra & Nilsā€Henrik Fehr & David Harbord, 2006. "Designing electricity auctions," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 23-46, 03.
  2. Peter Cramton & Jeffrey Lien, 2000. "Eliminating the Flaws in New England's Reserve Markets," Papers of Peter Cramton 00flaws, University of Maryland, Department of Economics - Peter Cramton, revised 11 Mar 2000.
  3. Peter Cramton, 2000. "Review of the Reserves and Operable Capability Markets: New England's Experience in the First Four Months," Papers of Peter Cramton 99reserves, University of Maryland, Department of Economics - Peter Cramton, revised 03 Jan 2000.

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