Market Plurality and Manipulation: Performance Comparison of Independent System Operators

In this paper, the authors present three different models that represent the coordinating functions of existing independent system operators (ISOs) and discuss their advantages and disadvantages. Max-ISO is a centralized operator based on the pool model, and mm-ISO is a decentralized operator based on the bilateral model. Mix-ISO is positioned in-between, having multiple power exchanges or bilateral contracts. The performance of the different ISOs is compared by the total social welfare and the vulnerability to market manipulation. A numerical example is presented to compare the performance of different ISOs. The max-ISO is considered to be the most efficient model theoretically, but it does not necessarily provide the best market in terms of vulnerability to market manipulation.