My concluding observation in yesterday’s post isn’t quite correct.
The Pivotal Supplier Index says nothing about whether a plant is at the margin – i.e. setting the hour’s price.
PSALM’s units may indeed be setting the price frequently – indeed they probably are given that their thermal units are some of the higher cost units – even though their units tend not to be "pivotal."
A pivotal generator is one whose capacity is larger than the surplus supply (the difference between total supply and demand) in the wholesale market for a particular hour.
Question: If indeed PSALM’s units tend to be at the margin and if Kepco/Mirant and First Gen tend to control the pivotal units, who has ultimate control of market prices?
I’ll leave it one of you economists to address that.
In the meantime, here is a paper from March 2005 entitled "A Review of the Monitoring of Market Power" which has a nice concise description of the HHI, RSI, PSI, and other indices.