Appendix C to the Notice of Proposed Rulemaking
Supplement to Appendix C: Auctionomics/Power Auctions Option for Forward Auction (February 1, 2013)

To illustrate the use of intra-round bids, we provide the following example with six License Categories.

License Category A B C D E F
Target Supply 9 9 9 9 9 9
Start-of-round price 40 20 40 60 40 20
End-of-round price 42 21 42 63 42 21

Suppose that the processed demands from the previous round are as follows:

Processed demands (end of previous round) A B C D E F
Bidder 1 1 1 1 0 1 1
Bidder 2 1 1 1 2 0 0
All others 8 9 8 10 12 10
Aggregate Demand 10 11 10 12 13 11

And suppose that the following intra-round bids are submitted in the current round:

Bids Price point A B C D E F
Bidder 1 20% -1 0 0 0 0 0
Bidder 2 40% 0 -1 0 0 0 0
Bidder 2 60% -1 0 +1 0 0 0
Bidder 2 80% 0 0 0 -1 +1 +1

The first intra-round bid to be processed is Bidder 1’s bid at the 20% price point, which is understood to be a proposed change in its demand from the 0% price point.

Demands Price point A B C D E F
Bidder 1 0% 1 1 1 0 1 1
  20% -1 0 0 0 0 0
Bidder 1 20% 0 1 1 0 1 1
Bidder 2 20% 1 1 1 2 0 0
All others 20% 8 9 8 10 12 10
Aggregate 20% 9 11 10 12 13 11

Observe that Bidder 1’s intra-round bid is feasible, as its application would result in Aggregate Demand that is at least the Target Supply of 9 for all License Categories.

Next, Bidder 2’s first bid, at the 40% price point, is processed as follows, noting that its processed demand from the previous round is carried forward and treated as its demand at the 0% price point of the current round. Meanwhile, Bidder 1’s demand is unchanged from the 20% price point, and all other bidders’ demands are unchanged from the previous round:

Demands Price point A B C D E F
Bidder 2 0% 1 1 1 2 0 0
  40% 0 -1 0 0 0 0
Bidder 2 40% 1 0 1 2 0 0
Bidder 1 40% 0 1 1 0 1 1
All others 40% 8 9 8 10 12 10
Aggregate 40% 9 10 10 12 13 11

Observe that Bidder 2’s bid at the 40% price point is feasible, as it results in Aggregate Demand that is at least the Target Supply of 9 in all License Categories.

Next, Bidder 2’s bid at the 60% price point is processed as follows, noting that Bidder 1’s demand is still unchanged from the 20% price point, and all other bidders’ demands are still unchanged from the previous round:

Demands Price point A B C D E F
Bidder 2 40% 1 0 1 2 0 0
  60% -1 0 +1 0 0 0
Bidder 2 60% -1 0 +1 0 0 0
Bidder 1 60% 0 1 1 0 1 1
All others 60% 8 9 8 10 12 10
Aggregate 60% 8 10 11 12 13 11

Observe that Bidder 2’s bid at the 60% price point is infeasible, as it would result in Aggregate Demand that is only 8–less than the Target Supply of 9–for License Category A. Consequently, no part of this bid is implemented, neither the decrease for License Category A nor the increase for License Category C. Instead, Bidder 2’s bid at the 60% price point is placed in the queue.

Finally, Bidder 2’s bid at the 80% price point is processed. The first processing step is adding its bid to its demand at the 40% price point, having rejected its bid at the 60% price point. Thus, the calculations are:

Demands Price point A B C D E F
Bidder 2 40% 1 0 1 2 0 0
  80% 0 0 0 -1 +1 +1
Bidder 2 80% 1 0 1 1 1 1
Bidder 1 80% 0 1 1 0 1 1
All others 80% 8 9 8 10 12 10
Aggregate 80% 9 10 10 11 14 12

After this (or any) intra-round bid is processed, another pass is made through bids in the queue to see if any can be feasibly applied. In this case, the one bid in the queue remains infeasible. There are no more bids to process, so bids in the queue are discarded and the round processing is over.

At the end of the round, for License Category A, Target Supply equals Demand. Since the last price point at which demand changed for this License Category was 20%, the Posted Price at the end of the round is 40.4, computed as 40+.2x(42-40). For all other License Categories, Demand exceeds Target Supply, and so the Posted Prices for those License Categories are equal to the end-of-round prices. The start-of-round prices for the next round are therefore given as follows:

License Category A B C D E F
Target Supply 9 9 9 9 9 9
Next start-of-round price 40.4 21 42 63 42 21

In summary, in this example, Bidder 1’s bid, and two out of three of Bidder 2’s bids, are applied; the remaining bid of Bidder 2 is not applied (and is ultimately discarded); and the price for License Category A rises by only 20% of the maximum increment for License Category A.