Skip to main content
Log in

Abstract

Competition was introduced into the electric utility industry with the passage of the Public Utilities Regulatory Policy Act (PURPA) of 1978. Increasing interest has appeared in structuring the PURPA purchase market into an auction system. This paper addresses the design issues associated with setting up such markets and introduces a simulation model to study them. The simulation analysis is guided by theoretical issues such as the alleged inefficiency of first-price auctions. We find that efficiency concerns raised about first-price auctions turn out to be less important than simple theoretical concerns would suggest.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

References

  • Boston Edison Company. 1988. “Request for Proposals.” Massachusetts Department of Public Utilities Docket No. 84-276 (November).

  • California Public Utilities Commission. 1986. “Decision No. 86-07-004”. (July 2).

  • California Energy Commission. 1985. “Appendix F to Commission Decision on the Gilroy Cogeneration Project”. Docket No. 84-AFC-4 (November).

  • California Energy Commission. 1986. “1986 Electricity Report.”

  • Devine, M., M. Chartock, E. Gunn, and D. Huettner. 1987. “PURPA 210 Avoided Cost Rates: Economic and Implementation Issues.” Energy Systems and Policy 11:85–101.

    Google Scholar 

  • Friedman, L. 1956. “A Competitive Bidding Strategy”. Operations Research 4:104–112.

    Article  Google Scholar 

  • Gilley, O., and G. Karels. 1981. “The Competitive Effect in Bonus Bidding: New Evidence”. Bell Journal of Economics 12:637–648.

    Article  Google Scholar 

  • Hansen, R.G. 1986. “Sealed-Bid Versus Open Auctions: The Evidence”. Economic Inquiry 24:125–142.

    Article  Google Scholar 

  • Joskow, P., and D. Jones. 1983. “The Simple Economics of Industrial Cogeneration.” Energy Journal 4:1–22.

    Article  Google Scholar 

  • Jurewitz, J. 1986. “Testimony on Behalf of Southern California Edison Company in CPUC Appl. No. 82-04-046.”

  • Kahn, E., and C. Goldman. 1987. “Impact on Tax Reform on Renewable Energy and Cogeneration Projects.” Energy Economics 9:215–226.

    Article  Google Scholar 

  • Marcus, D. 1986. “Appendix A to Supplemental Testimony on Behalf of the Crockett Cogeneration Project.” California Energy Commission Docket No. 84-AFC-3.

  • McCabe, K., S. Rassenti, and V. Smith, (forthcoming). “Designing ‘Smart’ Computer-Assisted Markets:An Experimental Auction for Gas Networks.” European Journal of Political Economy.

  • Myerson, R.B. 1981. “Optimal Auction Design.” Mathematics of Operations Research 6:58–73.

    Article  Google Scholar 

  • New Jersey Board of Public Utilities. 1987. “An Assessment of Cogeneration and Small Power Production Policy in New Jersey. 1981–1986.”

  • New York Department of Public Service. 1987. “Staff Position Paper on the Advantages and Disadvantages of Bidding and Avoided Cost Pricing Alternatives Relative to the Current System for the Provision of Electricity Supplies.” jtCase 29409.

  • Pacific Gas and Electric Company. 1987. “Common Forecasting Methodology 7, v. 1 Resource Planning Approach.”

  • Pfeffer, Lindsay, and Associates}. 1986. “Emerging Policy Issues in PURPA Implementation.” U.S.D.O.E. report DOE/PE-70404-H1.

  • Rothkopf, M., E. Kahn, T. Teisbert, J. Eto, and J. Nataf. 1987. “Designing PURPA Power Auctions: Theory and Practice.” LBL-23906. (Also reprinted as U.S.D.O.E. reportDOE/SF/00098-H1, 1987).

  • Rothkopf, M., T. Teisberg, and E. Kahn. 1990. “Why are Vickrey Auctions Rare?” Journal of Political Economy 98:94–109.

    Article  Google Scholar 

  • U.S. Federal Energy Regulatory Commission. 1988. “Notice of Proposed Rulemaking Regulations Governing Independent Power Producers.” Docket No. RM 88-4-000 (March 16).

  • Vail, G. 1986. “A Summary of Auction Economics: Application to the OIR-2 Proceedings.” Southern California Edison Company.

  • Vickrey, W. 1961. “Counterspeculation, Auctions and Competitive Sealed Tenders.” Journal of Finance 16:8–37.

    Article  Google Scholar 

  • Western Massachusetts Electric Company. 1986. “Request for Proposals.” Massachusetts Department of Public Utilities Docket No. 84-276-B.

Download references

Author information

Authors and Affiliations

Authors

Rights and permissions

Reprints and permissions

About this article

Cite this article

Kahn, E.P., Rothkopf, M.H., Eto, J.H. et al. Auctions for PURPA purchases: A simulation study. J Regul Econ 2, 129–149 (1990). https://doi.org/10.1007/BF00165930

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/BF00165930

Keywords

Navigation