Large-Scale Market Power Modeling: Analysis of the U.S. Eastern Interconnection and Regulatory Applications

This paper presents results from a large-scale Cournot model of the U.S. Eastern Interconnection using a DC load flow network. There are 100 network locations (at the level of control areas) along with 2725 generators owned by 99 Cournot firms and 200 competitive fringe suppliers. These results demonstrate that this modeling approach can analyze potential generation market power with a reasonable approximation of the actual transmission network over a large integrated region. While such models have been used to analyze market design alternatives, their application to regulatory decision-making concerning generation market power mitigation has been more controversial. We suggest that such large-scale market price simulations could improve upon aspects of the existing generation market power screening methods used in the United States for mergers and market-based rates, illustrating such applications using this model.