The TC-PSI indicator for forecasting the potential for market power in wholesale electricity markets

Wholesale electricity market regulators have long sought a simple, reliable, transparent indicator of the likely impact of wholesale market developments on the exercise of market power. Conventional indicators, such as the Pivotal Supplier Indicator (PSI) and the Residual Supply Index (RSI) cannot be extended to apply to meshed transmission networks, especially when generating companies hold a portfolio of generating units at different locations on the network. This paper proposes a generalisation of these standard measures termed the ‘Transmission‐Constrained Pivotal Supplier Indicator (TC‐PSI)’. The TC‐PSI of a generating company is defined as the maximum must‐run generation for any subset of generating plant while allowing for strategic operation of other plant in the portfolio. We illustrate the use of the TC‐PSI using a five‐node model of the Australian NEM.