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Competitive Bidding In Electricity Markets: A Survey

Abstract:
A number of states as well as the Federal Energy Regulatory Commission have been considering whether traditional regulatory regimes in electricity and natural gas markets should be replaced with competitive bidding systems. This shift is designed to yield a more efficient allocation of energy resources within the existing legal framework The paper examines both the theoretical basis and empirical evidence on bidding processes in light of the characteristics of energy markets, especially electricity markets. It then discusses the extent to which one can draw policy conclusions about designing specific bidding processes for these markets. It concludes that given the underlying complexity of the products involved, the optimal system for procuring power should include a mix of bidding negotiation and utility construction.

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Energy Specializations: Electricity – Markets and Prices

JEL Codes:
D42 - Market Structure, Pricing, and Design: Monopoly

Keywords: Electricity markets, Competitive bidding, Regulation, Natural gas

DOI: 10.5547/ISSN0195-6574-EJ-Vol10-No4-8


Published in Volume 10, Number 4 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.