A tool proposal to detect operating anomalies in the Spanish wholesale electricity market

Abstract

Mainly in the mass media, the operating of the wholesale electricity market in Spain is under of controversy because of the sensitivity of end consumers to the price of their electricity bill. Part of the controversy derives from possible collusive behavior from the main generation companies due they shared 55% of wholesale market. The goal of this paper is to design a tool to detect anomalies in determining electricity prices on that market. The tool claim to be used by supervisory agencies with responsibility on this market. The tool is based on a spatial LMDI-I decomposition analysis. This methodological approach has been less developed in the literature than the temporal LMDI-I analysis. Decomposition is applied to the differences between the daily cost and monthly average cost of electricity generation. To test the smooth functioning of the tool, data was taken for a period of time in which the supervisory agency sanctioned proceedings for generation companies but also for control periods of time when no sanctions were imposed. The decomposition analysis used the price, structure and scale effects as the decomposition effects. The proposed tool has allowed us to capture anomalous behaviours of the electricity costs in the electricity wholesale market for the same periods in which the supervisory agency in charge initiated sanctioning proceedings. These anomalies do not appear in the control periods for which the tool was tested.