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Full-Text Articles in Economics
Efficiency In Deregulated Electricity Markets: Offer Cost Minimization Vs. Payment Cost Minimization Auction, Rimvydas Baltaduonis
Efficiency In Deregulated Electricity Markets: Offer Cost Minimization Vs. Payment Cost Minimization Auction, Rimvydas Baltaduonis
Economics Faculty Publications
A payment cost minimization (PCM) auction has been proposed to solve the problem of inflated wholesale electricity prices. In the electricity industry, where even small changes in $/MW are worth tens of millions of dollars, it is highly important that policy makers have a good understanding of the tradeoffs and impacts of new institutional rules. In this paper we examine efficiency performance of the proposed PCM auction in contrast with the offer cost minimization (OCM) auction currently used by most independent system operators (ISOs) in the United States. For most of the analysis we concentrate on production efficiency, which is …