Motivated by the new auction format introduced in the England and Wales electricity market, as well as the recent debate in California, we characterize bidding behavior and market outcomes in uniform and discriminatory electricity auctions. We find that uniform auctions result in higher average prices than discriminatory auctions, but the ranking in terms of productive efficiency is ambiguous. The comparative effects of other market design features, such as the number of steps in suppliers' bid functions, the duration of bids and the elasticity of demand are also analyzed. We also consider the relationship between market structure and market performance in the two auction formats. Finally, we clarify some methodological issues in the analysis of electricity auctions. In particular, we show that analogies with continuous share auctions are misplaced so long as firms are restricted to a finite number of bids.

JEL Classification Numbers: D44, L94, L10, L5

Keywords: Market design, electricity, multi-unit auctions, regulatory reform.

Acknowledgements: We are grateful for comments from Maria-Angeles de Frutos and seminar participants at the IDEI Conference on Wholesale Electricity Markets (University of Toulouse), University of Virginia and UCEI (University of California at Berkeley). The first author would like to thank the University of California Energy Institute for their support during the preparation of this paper.

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