Multiple Market-Clearing Prices, Electricity Market Design and Price Manipulation

Multiple market-clearing prices arise from degenerate pricing conditions that can occur in electricity markets under economic dispatch. A stand-alone profitability test can distinguish transactions that are consistent with workably competitive markets from transactions that serve no economic purpose other than to manipulate prices and profit from other financial contracts. Generalizing this standard to the degenerate conditions that give rise to multiple market-clearing prices provides a principled solution, without undermining the market-design foundations that integrate economic dispatch, locational prices and financial transmission rights.