Analysis of Credit Management and Its Effects in Yunnan Electricity Market

Based on the widely accepted experience of general commodity exchanges and power exchanges, credit management plays an important role in preventing possible risk regarding market credit. The credit management mechanism of Kunming Power Exchange is based on credit evaluation-The exchange scores a market participants credit by evaluating its willingness and ability to perform contracts. The exchange believes that these results reflect their trading performance as well as probability of default, which helps both the exchange and market participants to identify and prevent credit risk. As currently the evaluation rules are not based on historical data, which are not available in the newly established market, their effectiveness needs to be comprehensively analyzed. Several indicators are selected to evaluate the contract fulfillment of the market participants, and the empirical results indicate that there is strong correlation between a participants credit score and its trading performance.