Competitive Transmission Path Assessment for Local Market Power Mitigation

Market power in wholesale electricity markets is of paramount concern to energy market monitors and regulators worldwide. Transmission constraints can and often do create market power opportunities. Transmission constraints into a generation-constrained load pocket can result in limited competition for meeting demand in that region due to a high local ownership concentration of supply. In this circumstance, generation owners within the load pocket can withhold capacity and induce congestion on connecting paths, creating an uncompetitive situation for the residual demand in that location. Identifying the existence of local market power in this circumstance relies on developing a methodology that can accurately differentiate transmission constraints that are "competitive", Le., for which there is sufficient competition to avoid or relieve congestion, from those that are not. This paper provides a new methodology (called the "feasibility index" or "FI" method) to perform such a classification for California ISO, and compares it with methods previously used at Pennsylvania- Jersey-Maryland (PJM) and Midwest ISO (MISO). The term "transmission path", or simply "path", is used here to denote a transmission interface for which transmission constraints are enforced in the scheduling and market-clearing process. Pivotal supplier analysis, Le., assessing whether any single supplier is indispensable for providing congestion relief, is central to competitive path assessment. It is a common feature of competitive path assessment methodologies used in PJM and MISO, and the new methodology developed for California ISO. The approach used in PJM and MISO is to use shift factors (also known as Power Transfer Distribution Factors) to determine the impact of specific generation resources on the power flow on individual transmission paths. Shift factors require an arbitrary choice of a slack bus (single or distributed slack) as the sink for power injected at the location (node) in questi- - on to determine the resulting change in the flow on the path of interest. This choice has a potentially important impact on the outcome. The FI methodology developed for California ISO identifies pivotal supplies without the need to use shift factors; moreover, it is comprehensive in that it considers the interacting effect of all constraints at once. The FI methodology is being used to conduct a comprehensive competitive path assessment for the California ISO network using a detailed 3,000-node network model in preparation for implementation of the market design and technology upgrade (MRTU) project in early 2008.