Market power mitigation and standard market design

The Federal Energy Regulatory Commission´s standard market design (SMD) analysis for market mitigation recognizes the need to balance the requirements of scarcity pricing. The use of bid caps in the twin settings of local market power mitigation and a safety bet designed as a proxy for demand-side response is consistent with the SMD core elements and the broad objectives of electricity restructuring. If these elements are handled well, it could obviate the need for the more problematic proposal for a resource adequacy requirement.