Lessons from the 2006 Illinois Electricity Auction

The high prices of the outcomes of the 2006 Illinois Electricity Auction have generated considerably controversy because of their impacts in increasing retail electricity prices in Illinois. In this work, we present a review and a critical analysis of the design of, and the results obtained in, the reverse auction performed in September of 2006 for the two major distribution companies, ComEd and Ameren. Our work is from the vantage point of power system operations and economics, and aims to assess how well the auction process was designed, putting special emphasis in the consequences of the definition of the products.