The Nature of Supply Bidding in Pennsylvania Electricity Markets
Open Access
- Author:
- Mackenthun, Alina Noreen
- Area of Honors:
- Energy, Business, and Finance
- Degree:
- Bachelor of Science
- Document Type:
- Thesis
- Thesis Supervisors:
- Andrew Nathan Kleit, Thesis Supervisor
Andrew Nathan Kleit, Thesis Honors Advisor
Dr. Anastasia Shcherbakova, Faculty Reader - Keywords:
- deregulation
electricity markets
Pennsylvania
supply bidding - Abstract:
- The nature of bidding for supply contracts in electricity markets is not well-understood. In particular, it is not clear what drives the number of bidders or the winning bid price. Though many jurisdictions worldwide have restructured their electricity markets, the only research on this topic is Hattori (Energy Economics, 2010), which only deals with the number of bidders for particular contracts in Japanese electricity markets. This paper analyzes competition in the scope of Pennsylvania’s electricity market, which is among the most deregulated in the U.S., both at the wholesale and more recently retail levels. Specifically, this paper examines what factors impact the number of bidders and the price of the winning bid in the Pennsylvania Power and Light territory, using data from the Penn State Facilities Engineering Institute (PSFEI), which acts as a technical advisor for a large number of state agencies and private entities. The data provides the base for an analysis of the effect that both wholesale and retail competition had on the contract bidding process within the state, and whether each type of competition had a significant impact on the number and level of bids. Using similar controls to those employed by Hattori on demand levels, contract length and regional characteristics, this analysis shows that electric suppliers value the level of consumer demand, the future cost of serving electricity, and the type of bid allowed when constructing their bid prices . There is, however, little to no competition between suppliers on most of the contracts, which may be a consequence of the deregulation process in Pennsylvania and/or simply due to the preliminary nature of PSFEI’s hosting of the bidding events. Additional analysis should investigate the issue of competition as more suppliers become aware of and participate in the events in the future.