Market watchdog wants “fix” for wholesale power bidding system

By Dave Cooper, Edmonton Journal August 21, 2013

EDMONTON – The watchdog for Alberta’s wholesale electricity market wants authorities to make a “structural fix” to the system.

Market Surveillance Administrator Harry Chandler said his team uncovered 10 examples of unusual behaviour between August 2011 and April 2013 in which the Alberta Electric System Operator (AESO) allowed “sophisticated market participants” to decode its hourly report and discern the price and volume of power that their counterparts were likely to sell at during the next round.

“In a few number of hours, when the market conditions were propitious, this historical trading report is being used to raise the wholesale price higher than we think it would otherwise be,” said Chandler. “This (AESO) report should not be produced in such a manner because it just facilitates that kind of co-ordination.”

He wants delays in the release of data, or the publishing of wide price bands rather than specific prices.

Chandler had hoped AESO would issue a decision on his team’s recommendations this week but Miranda Keating Erickson, senior adviser of market services for AESO, said nothing will be done until further study is complete.

“The hourly reports came into existence to ensure we had a level playing field where the little guys could complete with the big guys, so transparency is really important in a competitive market,” she said. “So where it is suggested we pull information out of the market, it is important to weigh that against the law of unintended consequences.”

Erickson questioned the importance of the 10 incidents over 20,000 hours of operations.

“Were their some weird things that happened over a couple of hours that were not structural? We haven’t completed reviewing the (Chandler) report.”

Chandler’s report does not allege that there was any kind of agreement among the big power producers, or even that the long-term wholesale average power price of $67 per megawatt/hour has been altered by the relatively tiny changes over the period in question.

“These price excursions that we have identified … are very small in the great scheme of things,” said Chandler. “But in a market that relies on competition to protect consumers you have to get the parameters right. And one where everyone is showing all their cards is not ideal.”

Wildrose utilities critic Joe Anglin jumped into the debate this week, saying Chandler’s report “shows consumers are getting gouged and market manipulators are getting away with it.”

Chandler did not look at the extra earnings the power producers might have gained from the bidding system, and he said while his office has the power to investigate market players, his initial task is to report problems and suggest remedies.

Anglin said the MSA’s findings require further investigation and called on government to relieve electricity consumers of unfair price fixing.

“In any other province, these findings would result in a criminal investigation.”

But Chandler, who has spent 40 years in the areas of competition, consumer and regulatory law, said such a comment is off-base.

“I think I should have a pretty good understanding of what constitutes a criminal investigation.”

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