Offer Price Information and the Exercise of Market Power: The Effect of the Publication of the Historical Trading Report on Competition in the Alberta Electricity Market
Restricted accessResearch articleFirst published online June, 2021
Offer Price Information and the Exercise of Market Power: The Effect of the Publication of the Historical Trading Report on Competition in the Alberta Electricity Market
This paper considers the effect of the publication of offer price information on unilateral market power in Alberta’s electricity market. This market is an hourly auction characterized by repeated interaction among a small number of producers, common knowledge of costs and production capabilities, and price inelastic demand.
For the period July 13, 2000 to May 18, 2017, offer prices for each hour were published by the market operator, the Alberta Electric System Operator (AESO), in the Historical Trading Report (HTR) after the end of the hour. Using counter-factual analysis from 2010 to 2015 (52,584 hours), the paper finds that the effect of offer price changes after the HTR publication was to raise the average hourly price for electricity in Alberta by $2.48/MWh or about 4.2%, which raised the cost of electricity for Alberta consumers during the six-year period by approximately $1.14 billion.
Based on an earlier version of this paper, the AESO was instructed by Alberta’s utilities regulator to cease publication of the HTR.
Get full access to this article
View all access options for this article.
References
1.
Alberta Electric System Operator (2012) “Price restatement period review” January 24.
2.
Alberta Electric System Operator (2013) “ISO Rules. Part 200 Markets. Division 203 Energy Markets. Section 203.1, Energy Restatements.” December 20.
3.
Alberta Electric System Operator (2014) “ISO Rules. Part 200 Markets. Division 203 Energy Markets. Section 203.3, Energy Restatements.” July 2.
4.
Alberta Utilities Commission (2017) “Application by the Market Surveillance Administrator regarding the publication of the Historical Trading Report.” Alberta Utilities Commission Decision 21115-D01-2017. May17.
5.
AroonruengsawatAroonruengsawatAuffhammerMaximillianSanstadAlan H. (2012). “The impacts of state level building codes on residential electricity consumption.” The Energy Journal33(1): 31-52. https://doi.org/10.5547/ISSN0195-6574-EJ-Vol33-No1-2.
6.
BolleFriedel (1992). “Supply function equilibria and the danger of tacit collusion.” Energy Economics 14(2): 94-102.https://doi.org/10.1016/0140-9883(92)90002-U.
7.
BrownDavid P.EckertAndrewLinJames (2018) “Information and transparency in wholesale electricity markets: Evidence from Alberta.” Journal of Regulatory Economics 54(3): 292-330, December. https://doi.org/10.1007/s11149-018-9372-z.
8.
BrownDavid P.EckertAndrew (2019). “Pricing patterns in wholesale electricity markets: Unilateral market power or coordinated behavior?” University of Alberta Working Paper.
9.
BrownDavid P.OlmsteadDerek E.H. (2017). “Measuring market power and the efficiency of Alberta’s restructured electricity market: An energy-only market design.” Canadian Journal of Economics 50(3): 838-70, August. https://doi.org/10.1111/caje.12280.
10.
Environment and Climate Change Canada: Historical Climate Data: Historical Data (undated). Available online at https://cli-mate.weather.gc.ca/historical_data/search_historic_data_e.htmlhttps://climate.weather.gc.ca/historical_data/search_his-toric_data_e.html. Retrieved on June2, 2019.
11.
FairFairCompetitionOpen Regulation. Alberta Regulation 159/2009.
12.
FamaEugene F.FisherLawrenceJensenMichael C.RollRichard (1969). “The adjustment of stock prices to new information.” International Economic Review10: 1-21. https://doi.org/10.2307/2525569.
13.
GreenGreenNewberyDavid M. (1992). “Competition in the British electricity spot market.” Journal of Political Economy, 100(5): 929-53. https://doi.org/10.1086/261846.
14.
HolmbergHolmbergNewberyDavid M. (2010). “The supply function equilibrium and its policy implications for wholesale electricity auctions.” Utilities Policy18(4): 209-26. https://doi.org/10.1016/jjup.2010.06.001.
15.
HolmbergHolmbergWolakFrank A. (2018). “Comparing auction designs where suppliers have uncertain costs and uncertain pivotal status.” RAND Journal of Economics49(4): 995-1027. https://doi.org/10.1111/1756-2171.12259.
16.
KlempererKlempererMeyerMargaret (1989). “Supply function equilibria in oligopoly under uncertainty.” Econometrica57(6): 1243-77. https://doi.org/10.2307/1913707.
17.
KothariS.P.WarnerJerold B. (2007). “Econometrics of Event Studies.” In B. Espen Eckbo (ed.) Handbook of Empirical Corporate Finance (Volume A, Chapter 1), Elsevier/North-Holland.
18.
LijesenMark G. (2007). “The real-time price elasticity of electricity.” Energy Economics29(2): 249-58. https://doi.org/10.1016/j.eneco.2006.08.008.
19.
MansurErin (2008). “Measuring Welfare in Restructured Electricity Markets.” The Review of Economics and Statistics90(2): 369-386. https://doi.org/10.1162/rest.90.2.369.
20.
Market Surveillance Administrator (2009). “2008 Year in Review.” May 14.
21.
Market Surveillance Administrator (2012). “State of the market report 2012: An assessment of structure, conduct, and performance of Alberta’s wholesale electricity market.” December 10.
22.
Market Surveillance Administrator (2013). “Coordinated effects and the Historical Trading Report: Decision and recommendation.” August 7.
23.
Market Surveillance Administrator (2015). “Application by the Market Surveillance Administrator in respect of the publication of Historical Trading Reports.” December 2.
24.
NeweyWhitney K.WestKenneth D. (1994). “Automatic lag selection in covariance matrix estimation.” Review of Economic Studies61(4): 631-53. https://doi.org/10.2307/2297912.
25.
OlmsteadDerek E. H.AyresMatthew J. (2014). “Notes from a small market: The energy-only market in Alberta.” Elec-tricityJournal, 27(4): 102-11. https://doi.org/10.1016Zj.tej.2014.04.010.
26.
OlmsteadDerek E. H. (2015). “Assessment of the impact of the Historical Trading Report on competition in the Alberta electricity market.” Exhibit number 21115-X0012, Alberta Utilities Commission Proceeding 21115, November30.
27.
SweetingAndrew (2007). “Market power In the England and Wales wholesale electricity market 1995-2000.” Economic Journal117(520): 654-85. https://doi.org/10.1111/j.1468-0297.2007.02045.x.
28.
VivesXavier (2011). “Strategic supply function competition with private information.” Econometrica79: 1919-66. https://doi.org/10.3982/ECTA8126.
29.
WolakFrank A. (2003). “Measuring unilateral market power in wholesale electricity markets: The California market 19982000.” American Economic Review Papers and Proceedings92(2): 425-30. https://doi.org/10.1257/000282803321947461.
