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Virtual Bidding White Paper

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Summary:

Virtual Bidding White Paper. Convergence bidding (also known as “virtual bidding”) offers potential for improved market efficiency under the type of two-settlement energy market being implemented under MRTU. However, if not carefully designed, convergence bidding may also create the potential for market manipulation through exploiting market design or modeling flaws to the detriment of market efficiency and other participants.

Extract:

This paper focuses on market design, mitigation and monitoring options that may allow the benefits of convergence bidding to be realized, while avoiding or mitigating potential uses of convergence bidding that may be detrimental to market efficiency. The first section of this paper provides results of a benchmarking review of market design, mitigation and monitoring features and practices at three other ISOs that have implemented virtual bidding (New York, PJM, and New England). The final section provides a discussion highlighting some of the concerns with implementing convergence bidding after the release of MRTU from a perspective of market monitoring and mitigation of the potential problems associated with convergence bidding. 2. Benchmarking As the CAISO and stakeholders consider various design elements of convergence bidding that may pose market manipulation concerns, it is useful to draw from the tools and practices developed by other ISOs to address such concerns. This section describes the monitoring tools and practices they use.

Document Locations:

• MSC Meeting 13-Nov-2006