Date of Award

6-2013

Document Type

Open Access

Degree Name

Bachelor of Arts

Department

Economics

First Advisor

J. Douglass Klein

Language

English

Keywords

electricity, legislation, market, price, volatility

Abstract

The past two decades have born witness to a cascade of new legislation and market design measures to restructure the United States’ electric power industry from price-setting regulatory agencies to competitive markets. Deregulation was intended to increase competition and improve market efficiency while preserving the reliability of the transmission system. Results have varied in success, and deregulation has invariably led to an increase in both the overall price level of electricity and volatility of those prices. Investigating these deregulation consequences is crucial for market operations and retrospective analyses of deployed mechanism outcomes. The objective of this study is to extend the methodological research of Hadsell (2007) in examination of the effect of three market deployments and one exogenous factor on price volatility in the Capital Zone of the New York Independent System Operator (NYISO) markets. To accomplish this end, a Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model is used to model the conditional variance, or volatility, of a constructed return series of Real-Time prices. The GARCH models found an association between the three market deployments and a reduction in price volatility. These variables included: Lake Erie Loop Flow mitigation measures; establishment of a centralized wind forecasting system; and economic dispatch of wind resources. Furthermore, this study confirmed the association of Thunderstorm Alert (TSA) announcements and an increase in price volatility.

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