Effective market monitoring for surveillance of the Indian electricity market

Abstract

PurposeThe purpose of this paper is to introduce a prospective market monitoring system (MMS) for surveillance of Indian power market using a set of new market monitoring indices.Design/methodology/approachIt is necessary for the system regulators and policy makers to identify the potential market power and find ways to mitigate them to improve the market efficiency. The simple way to curb market power is the capping of bidding price to several times the average price of electricity. However, this approach is not ideal as it could mask the real market trading situation. The best way for the regulator is to identify which particular generators are exercising market power and deal with them individually.FindingsIdentification of major activities under MMS and effectiveness of new market indices have been established through quantitative analysis.Practical implicationsThe MMS will provide in‐time warning signals and identify the suppliers taking maximum unfair advantage which needs intense scrutiny by monitoring unit.Originality/valueVery few works have discussed detail market monitoring issues for the markets those are in their early stages of development like Indian electricity market. Indian Energy Exchange as a first power exchange in India became operative from June 2008, therefore, it is very important to develop an effective MMS.