The use of conduct and impact tests in the mitigation of market power

Mitigation of supplier offers, to approximate a competitive market outcome, is an appropriate response to the exercise of market power. Mitigation of competitive market outcomes during times of scarcity, however, is inappropriate. Such mitigation interferes with the appropriate market signals for the need of investment in the electrical power system. This paper discusses a two-part test, used at the NYISO to assess the need for mitigation of energy suppliers, which can make the distinction between scarcity conditions and the exercise of market power.