Monitoring Indices for Financial Risk in Wholesale Electricity Markets

In electricity markets, it is usually assumed that the markets will naturally produce a competitive result. However, the experience of many countries with liberalized electricity markets has shown that this is not always the case. The aim of this paper is to examine the methods developed by economists for detecting market power, and to provide an overview of the key elements necessary for effective design and implementation of market monitoring systems. After briefly reviewing definitions, strategies and methods of monitoring financial risk that have been employed by academics and market regulators, we originally propose several analytical indices for bidding strategies, including CPI, BDD, etc. Monitoring indices generally utilized in some electricity markets for financial risk are summarized and then categorized in four aspects (each includes several sub-indices): general status, market structure, bidding strategies and transaction results