Real and Reactive Power Prices and Market Power

The exercise of market power is a major concern in deregulating the electric energy business in the U.S. Exploitation of market power can destroy any market efficiencies and award unwarranted profits based solely on the lack of competition rather than on economic merit. There have been several attempts to quantify market power with much of the work focused separately on either real power or reactive power. This paper addresses a new possibility for a market participant to exploit an opportunity to increase revenue by gaming both real and reactive markets.