The Brattle Group has been asked by PJM to examine the market power mitigation practices used in PJM and other organized electricity markets, to assess the extent to which “best practices” have developed with respect to market power mitigation processes in electric power markets and, if appropriate, offer recommendations as to possible changes in PJM’s current practices in this regard. Specifically, this report encompasses the following tasks:
- Review the antitrust and academic literature, as well as the guidelines used in various organized power markets, in order to assess and develop an appropriate definition of “market power “ and “market power abuse,” and to clarify the objective standards that should be applied to monitoring electricity markets and mitigating market power in these markets;
- Review and document the scope of and approaches toward market monitoring and market power mitigation applied in other organized electricity markets, considering differences in market structure and design;
- Assess the effectiveness of the various approaches for identifying and mitigating market power used in electric power markets, possibly establishing what should be considered as “best practices”; and
- Recommend possible modifications, if any, to PJM’s current market monitoring and market power mitigation practices.