Market models & monitoring: assessing new techniques for long-term PPA auctions to support long-run policy decisions in Brazil

Since 2002 long-term PPA auctions have been the main mechanisms for energy selling and purchase in the Brazilian power system. With this framework, two issues are of special concern to Government agencies and market agents: (i) testing design of the auction and its impacts on the power sector and (ii) the definition of bidding strategies by Gencos in those auctions, so that maximize their profit adjusted by risk. This work presents new market models and techniques that can be used to monitoring market behavior and assessing potential for market power in those PPA auctions. A realistic application to a 17,000 MW PPA auction (involving 25 billion of US$), occurred in Brazil in early December 2004, will be presented.