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Capacity Auctions in France

MDI was retained to design the auction of 6 GWs of Electricite de France's generating capacity (about 6% of capacity in France). The capacity is sold in a series of auctions as Virtual Power Plants, which are options for energy. Both baseload and peak products with several durations are sold. Power Purchase Agreements were also sold in the first auction. MDI was later retained to implement the multiple ascending-clock design. The first auction occurred in September 2001 and the second in December 2001. Auctions are planned throughout 2002.

Market Design for Restructuring New England Power Markets

Peter Cramton, MDI President, was asked by ISO New England to review the planned market rules for the wholesale electricity market in New England. The resulting white paper, coauthored with Robert Wilson, identified several market flaws and made fundamental recommendations, such as the introduction of a multi-settlement system with demand-side bidding and market-based congestion management. All the major recommendations were adopted by ISO New England and subsequently endorsed by the NEPOOL executive committee. Since then MDI has been working with ISO New England and NEPOOL to implement these and other improvements to the New England market. The main responsibilities have been the development of a multi-settlement system with demand-side bidding and the improvement of the reserves and capacity markets.

Generation Asset Divestiture in Oregon

MDI was retained by the Oregon Public Utility Commission (OPUC) to evaluate the generation asset divestiture auction process proposed by Portland General Electric Company (PGE) and its financial advisor. PGE is wholly owned by Enron, an international energy marketing and sales company. We assessed how well the proposed auction process and alternatives meet the objectives of OPUC: maximize efficiency and the benefits for PGE customers, maximize the auction revenue to minimize utility stranded costs, ensure an equitable and transparent auction, preclude collusion, maintain system reliability, and foster competition. In addition, we evaluated the auction alternatives in terms of the advisability of allowing Enron to participate in the auction process as a bidder. MDI provided testimony in OPUC’s proceedings.

Power Purchase Arrangements in Alberta

MDI was retained by the Alberta Department of Resource Development (ADRD) as part of Alberta’s Independent Assessment Team (IAT). The IAT’s responsibilities included making assessments and determinations of power purchase arrangement (PPA) contracts to be auctioned. MDI provided advice on the form and structure of the PPAs, and are responsible for developing the design, rules, and implementation plan for the PPA auction. MDI advised in the implementation of the auction, which occurred in August 2000.

California Power Exchange

Robert Wilson, a Principal of MDI, has spearheaded our work for the California Power Exchange. Professor Wilson was hired by the California Trust for Power Industry Restructuring to redesign the rules for California’s day-ahead power auction. He developed an innovative design that overcame many of the problems in the existing Exchange rules. In particular, he devised auction rules that facilitate early, reliable price discovery and prevent gaming by bidders. These rules were tested in a series of bidding simulation experiments conducted at the California Institute of Technology. The Cal Tech experiments verified that Professor Wilson’s rules produced significant efficiency gains. The California Trust adopted Professor Wilson’s design, which will greatly simplify implementation of the day-ahead auction and significantly improve its performance.

COM/Electric Standard Offer Service Auction Design and Implementation

MDI was retained by COM/Electric to design and implement its standard offer service auction. The project was on an extremely fast track, requiring the unique MDI expertise to meet near-term deadlines. In the course of the project, we developed detailed design and implementation plans, developed software customized to the recommended design, organized bidder technical sessions, and saw through successful completion of the auction.

Eastern Utilities Standard Offer Service Auction Design

For Eastern Utilities, MDI developed a design and implementation plan for use in the utility’s standard offer service auction. As part of this assignment, we analyzed the technical and regulatory issues surrounding the standard offer service concept. The project involved three components: (1) a white paper explaining the advantages and disadvantages of alternative designs; (2) a report detailing the recommended auction design and rules; and (3) a comprehensive plan for implementing the recommended auction design. These were developed to meet the objectives of the client.

Auction Designs for a Major Electric Utility

MDI was retained by a major electric utility to design two auctions: one to divest generation assets and one to auction non-utility generator entitlements under power purchase agreements. Each project included a white paper on the advantages and disadvantages of alternative sale mechanisms and auction formats, a report on the recommended auction design with consistent auction rules, and a detailed implementation plan. These addressed the objectives of the utility and the concerns of the public utility regulators, including the valuation of stranded assets. This client remains confidential.

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