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Dynamics of Electricity Price Spreads in MISO and Manitoba Hydro: Evidence from Structural Breaks and ARMAX-GARCH Models

Author

Listed:
  • Sheybanivaziri, Samaneh

    (Dept. of Business and Management Science, Norwegian School of Economics)

  • Fram, Benjamin

    (Dept. of Business and Management Science, Norwegian School of Economics)

Abstract

In this paper, we examine the impact on price spreads in the Midcontinent Independent System Operator (MISO) wholesale electricity market due to a 2015 rule change that allowed bi-directional trade between the MISO and the neighboring Manitoba Hydro balancing area. We employ an ARMAX-GARCH model to measure the impact of this rule change on price spreads between the day-ahead and real-time market prices (DART price spreads) throughout the MISO market footprint. After controlling for extreme weather during the 2014 Polar Vortex and fluctuations in real-time generation quantities, we find that average DART price spreads decreased in both the northern region of the MISO (MISO North) and Manitoba Hydro after the implementation of the 2015 rule change. This result provides evidence that this rule change led to improved market alignment between MISO North and the Manitoba Hydro balancing area, possibly via improved utilization of joint network infrastructure.

Suggested Citation

  • Sheybanivaziri, Samaneh & Fram, Benjamin, 2026. "Dynamics of Electricity Price Spreads in MISO and Manitoba Hydro: Evidence from Structural Breaks and ARMAX-GARCH Models," Discussion Papers 2026/12, Norwegian School of Economics, Department of Business and Management Science.
    • Handle: RePEc:hhs:nhhfms:2026_012
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting

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