Analysis of Strategic Bidding and Withholding

Analysis Group deployed at least three different analytic approaches to assess whether the exercise of market power led to high prices in California and the western US. First, we developed a set of competitive counterfactual prices based on the assumption of marginal cost pricing. Second, we developed direct estimates of withholding by examining the physical operation of California merchant units using the EPA’s CEMS data. Third, we used publicly available bid data from the California ISO’s imbalanced energy market to assess whether merchant generators’ bids were consistent with models of strategic bidding in multi-unit auctions. Much of our work in this area has resulted in published papers.