University of California Energy Institute

PWP-006

Bidder Cost Revelation in Electric Power Auctions

James B. Bushnell and Shmuel S. Oren (U.C. Berkeley)

Competitive auctions for electric power sources whose operation will be based upon economic dispatch raise new challenges for auction designers. The efficient selection and operation of such generation sources requires revelation of bidder types over two dimensions, fixed and variable costs. In PWP-006, Oren and Bushnell show that the way in which fixed and variable prices are combined into a net score, which determines the winning bids, plays a key role in influencing bidders' behavior. They analyze bidder strategies and develop necessary conditions of bid scoring systems for the existence of strategies that will result in efficient operation. Existing and proposed bid scoring systems are examined using their results.