Product Design for Colombia’s Regulated Market

I propose a market based on a single load-following product in which each supplier bids to serve its desired share of the Colombia regulated load. Thus, a supplier that wins a 10% share at auction has an obligation to serve 10% of the actual regulated load in every hour of the commitment period. The supplier is paid the MOR clearing price for every MWh of energy supplied. Deviations between the supplier’s hourly supply and obligation are settled at the spot energy price or the scarcity price, whichever is lower. The spot settlement price is capped at the scarcity price, since the firm energy market provides price coverage for prices above the scarcity price (about $260/kWh in January 2007 Colombian pesos).