Armenia Wholesale Electricity Market Monitoring Guidelines

The program is designed to introduce market-based mechanisms into the electricity sector, relying on competition to meet part of the demand of the system. This approach seeks to achieve efficient operation of existing assets and create incentives for investment in new assets. The Armenia electricity market rules, together with the Armenia Energy Law, reform the energy sector by introducing competition in key areas of the market, including the Day Ahead Market (DAM), bilateral contracts market, and retail supply. While price regulation will continue to be prevalent in all segments of the industry, the rules make a first step toward relying on competition to establish efficient operations and investment in the industry. Effective and efficient competition is critical for successful liberalization, and market monitoring is a critical feature of liberalizing the markets. Market monitoring helps ensure effective and efficient markets by identifying potential anticompetitive behavior by market participants, evaluating and identifying ineffective market rules and tariff provisions, and providing comprehensive analysis and reporting. This includes monitoring the conduct of the market participants, market outcomes, market rules, and the market and network operators. Independent market monitoring is essential for successful liberalization, and the success of the Armenia market reforms will depend on effectively identifying and mitigating market power through well-designed market monitoring. The Market Monitoring Guidelines (MMG) identify a market monitoring approach to collecting and analyzing market and participant data in order to ensure participant conduct and market outcomes are effective and efficient. The MMG are divided into six areas that address a range of topics, including monitoring tools for the DAM, market outcomes, physical withholding, transparency, and retail monitoring. Each area defines the data required to implement the tool, the specific monitoring indicators, the thresholds to establish a reasonable range for the indicator values, and the actions for regulators when the indicator is outside the threshold ranges. Data collected under the MMG meet two main objectives. First, key market and operating data are used to identify market metrics and screens that monitor participant conduct and market outcomes, as well as to provide reports to regulators. This data is provided mainly through the Electricity Market Operator's (EMO) Market Management System (MMS) but data to meet this objective also is collected directly from the market participants or third-party data providers. A second objective of the data collection is to specify transparency requirements that will be useful for enabling market participants to make informed market decisions. The transparency requirements are modeled after the EU transparency policies and will be mainly provided by the Electricity System Operator (ESO). The transparency data is aimed primarily at ensuring all market participants have equal access to operating conditions, such as outages, demand, and transmission availability. Procedures to ensure data is procured in a timely and consistent manner are critical for effective monitoring. The MMG establish monitoring in other key areas to provide regulators with important measures of operations and market performance. The monitoring activity is exercised based on the monitoring indicators, and the data collected under the MMG meet two main objectives. The MMG provide a framework for collecting, analyzing, and reporting data for the purposes of monitoring the Armenia electricity markets, and they are designed to provide Armenia regulators with tools to help ensure liberalized electricity markets attain the promise of effective and efficient competition.