اثر هماهنگی بر مشارکت در بازار عمده فروشی صنعت برق

ABSTRACT The impact of coordination on wholesale market participation The case of the U.S. electricity industry

On December 20, 1999, the Federal Energy Regulatory Commission (FERC or “the Commission”) issued Order No. 2000 in Docket No. RM99-2-000, a docket opened to explore the role of Regional Transmission Organizations (RTOs) in the restructured electricity marketplace. The role of a RTO is to administer the electric transmission system, ensuring open access to the grid for all electricity generators. The FERC noted that since FERC Order 888 was issued in 1996, trade in the bulk electricity markets had increased significantly. FERC also noted that during the Notice of Proposed Rulemaking process for the instant docket, the Commission had “reviewed evidence that traditional management of the transmission grid by vertically integrated electric utilities was inadequate to support the efficient and reliable operation that is needed for the continued development of competitive electricity markets, and that continued discrimination in the provision of transmission services by vertically integrated utilities may also be impeding fully competitive electricity markets.”2 FERC further enjoined utilities, state officials, and affected interest groups to voluntarily develop RTOs. Despite the urging of FERC, there remain substantial portions of the United States electricity grid that are not administered by RTOs or Independent System Operators (ISOs). While there are structural differences 3 between the two types of organizations, the basic function of providing transparency in wholesale electricity pricing remains. Since that is the function analyzed in the paper, the terms ISOs or RTOs as used here are effectively indistinguishable.

Coase (1960) observed that there are costs involved in carrying out transactions in the market, such as the cost “to discover who it is that one wishes to deal with, to inform people that one wishes to deal and on what terms, to conduct negotiations leading up to the bargain, [and] to draw up the contract…”4 Milgrom and Roberts (1992) categorize these costs as either coordination or motivation costs. They define coordination costs in terms of the need to determine the price and other parameters of transactions, make the existence of buyers and sellers known to one another, and bring buyers and sellers together. Motivation costs arise from incomplete and asymmetric information and imperfect commitment. The wholesale market for electricity, where the relevant product is electricity delivered to a particular location at a particular point in time, is prone to coordination costs,5 as the product has an instantaneous useful life. RTOs and ISOs can have a direct explicit influence on coordination costs in the wholesale electricity market, but the direction of that influence is not always clear. One way in which RTOs can influence coordination costs is by publishing wholesale electricity prices in a manner that provides access to any party.6 But since the costs of these organizations are recovered from all utilities in their market footprint (Greenfield and Kwoka, 2011), the distribution of benefits is important to assessing the cost effectiveness and equity of these organizations. This paper employs a panel data set of United States electric utilities spanning the period 1990e2009 to investigate whether transparency increases the degree to which an electric utility participates in the wholesale market. The findings suggest that transparency increases the level of exchange of investor-owned utilities and larger utilities, regardless of ownership structure, but has no significant effect on the level of exchange of municipally owned and cooperative utilities, all else equal. This indicates that the distribution of the benefits afforded to participants in market administered by RTOs is not uniform across all market participants, while the costs are borne by all. The results of the analysis could be used to inform policy that could mitigate this inequity.

The remainder of the paper is organized as follows: Section 2 provides a discussion of the costs and benefits of RTOs, Section 3 provides a review of related literature, Section 4 describes the data utilized, Section 5 describes the empirical model and estimation methodology, Section 6 reports the results of the estimation, and Section 7 offers concluding remarks.