production of electricity. A number of studies of electricity trading in the US before by Enron bankruptcy in late 2001 estimated that each electron ultimately delivered through a US wholesale electricity market was bought and sold in forward markets more than five times. For this reason, even if the regulator attempted to collect this forward market data from suppliers on a regular basis it would not be very useful. For example, if the regulator specified a minimum quantity of forward contract sales for each supplier it regulated, these suppliers could undertake forward contract transactions with affiliates not subject to regulatory oversight to meet these minimums. Moreover, those affiliates not subject to oversight by the regulator could then re‐construct their holding company’s desired forward contract position. Consequently, routinely collecting the forward contract positions of suppliers could cause them to render this information of little or no use to the regulator through affiliate transactions.

There is a strong argument for keeping any forward contract positions the regulator might collect confidential. As noted in Wolak (2000a), the financial forward contract holdings of a supplier are major determinants of the aggressiveness of its bids into the spot market. Only if a supplier is confident that it will produce more than its forward contract obligations will it have an incentive to bid or schedule its units to raise the market price. Suppliers recognize this incentive created by forward contracts when they bid against competitors with forward contract holdings. Consequently, public disclosure of the forward contract holdings of market participants can convey useful information about the incentives of individual suppliers to raise market prices, with no countervailing reliability or market‐ efficiency enhancing benefits.

A final aspect of the data collection portion of the regulatory process is concerned with scheduled outage coordination and forced outage declarations. A major lesson from wholesale electricity markets around the world is the impossibility of determining whether a unit that is declared out‐of‐service can actually operate. Different from the former vertically integrated regime, declaring a “sick day” for a generation unit‐‐saying that it is unable to operate when in reality it could safely operate‐‐can be a very profitable way for a supplier to withhold capacity from the market in order to raise the wholesale price. To limit the ability of suppliers to use their planned and unplanned outage declarations in this manner, the market operator and regulator must specify clear rules for determining a unit’s planned outage schedule and for determining when a unit is forced out.

Before the start of each year, suppliers should submit to the system operator a schedule of planned outages for each of their units. The system operator would then compile the planned outage schedules submitted by all suppliers and verify that they do not compromise system reliability. If they do, then the system operator will suggest modifications to achieve a schedule of planned outages for all units consistent with reliable network operation on annual basis. Although the system operator should attempt to accommodate the wishes of each supplier, it must have the ultimate authority to set the final schedule for all planned outages. Once this planned outage schedule is set, it should be released to the public. Modifications of these unit‐level planned outages schedules during the year are subject to the approval of the system operator. These modifications should be released to the public once they are approved.

14