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INDUSTRIAL ENGINEERING AND  OPERATIONS RESEARCH
MONDAY SEMINAR
IEOR 298-1 - FALL 2000

Monday, October 23,  2000
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"Volatility of Electricity  Prices - Measurement and Analysis of Underlying  
Causes"
Dr.  Vincent Kaminski
Managing Director and Head of Research for Enron  Corp.

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Abstract:

The last three years were characterized  by exceptionally high volatility of 
the power prices in the US markets. The  market developments have created a 
number of unique challenges for energy  industry economists. One immediate 
question we have to answer is how to  measure volatility of energy prices. 
Although we can all agree that the  prices in the power markets are 
characterized by high variability, the  traditional measures used in 
financial economics (annualized standard  deviation of log price returns) may 
not fit well electricity prices.  


The second challenge is to explain the  sources of high price volatility and 
to answer the question to what extent  it can be attributed to problems that 
can be addressed in the long run. Such  problems include flaws in market 
design that allow some market participants  to abuse market power, limited 
availability and/or unequal access to  transmission, temporary shortages of 
generation capacity. Some factors  underlying high volatility of electricity 
prices may be of permanent nature  and may be a necessary price to pay for 
increased market efficiency and  expanded customer choice.


TIME  AND LOCATION: 3:30 - 5:00 P.M. - 3108 ETCHEVERRY
REFRESHMENTS: 3:00 P.M.  - 4TH FLOOR HALLWAY
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