Assessment of strategic market power in power systems

Abstract
This paper discusses the assessment of strategic market power in power systems. In general, market power is the ability of a particular seller or group of sellers to maintain prices profitably above competitive levels for significant periods of time. In assessing market power for power systems, the transmission network usually plays a crucial role in determining the market size, and hence the market concentration. The presence of congestion in the transmission system can significantly limit market size, and hence increase the potential for market participants to exercise market power. This paper considers the ability of market participants to make strategic use of the transmission network to deliberately induce congestion, and hence to increase the likelihood that the participants can exercise market power. The paper defines the problem, introduces methods for assessing the potential for such strategic behavior, and demonstrates results using a sample system.

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