unanticipated hot weather, generator outages) could lead to patterns of market bids that fail the PAVC test without necessarily indicating market power.
Under a PAVC standard for competitive pricing, no generator would be built; in any market, competitive or not, even the most expensive "marginal" generator has to expect that prices will, on average, cover not just its variable costs but also its fixed capital costs.
To get a feel for the flaw in the PAVC test, consider a more familiar industry: resort hotels.
The PAVC test would fail to predict competitive prices in the market.
The PAVC standard would correctly predict off-peak rates, but would fail on peak, setting the price at $50 when the competitive rate would be $170.
The PAVC test could be relevant if interest in visiting the resort fell dramatically after hotels were already built.