POWER STRUGGLE: Advocating for energy consumers
oo-high electricity bills can leave consumers wondering if their energy providers are cheating them. According to Associate Professor Bernard Lesieutre, they just might be. Lesieutre and his research group are trying to determine whether electricity suppliers can manipulate the markets to their advantage.
Current guidelines overseeing energy markets are based on financial models and regulations for market share; however, those models don’t take into account the physical limitations of the energy grid. Power lines have a limited capacity for how much electricity they can carry before they become congested, and too much power can physically warp the cables. Even an exceptionally hot day could reduce the amount of energy the lines can tolerate.
Because the lines cannot carry any more power, when conditions create congestion, competitors might not be able to supply power to where it’s needed. As a result, one power company might become the only provider in an area for a time.
“If they know or can guess that, they can raise their prices to make more money,” explains Lesieutre. “They know their electricity is no longer substitutable. People can’t get their energy from somewhere else because the grid is overloaded.”
Based on sensitivity analyses, Lesieutre’s group has determined that such inflation is possible. While there are regulations for substantial manipulation, current measures only apply to instances where prices increase by 300 percent or more.
“Our concern is this high threshold. It doesn’t detect a lot of times when rates are noncompetitive,” says Lesieutre. “Our research is to come up with something with a much finer resolution than that.”
Having identified scenarios with potential for market manipulation, the group’s next step is to develop measures to determine when companies are taking advantage of those scenarios. Ultimately, Lesieutre hopes to prevent this market manipulation.
