TRANSMISSION CONGESTION MANAGEMENT IN COMPETITIVE ELECTRICITY MARKETS

This paper studies the management of costs associated with transmissio n constraints (i.e., transmission congestion costs) in a competitive e lectricity market. The paper examines two approaches for dealing with these costs. The first approach is based an a nodal pricing framework and forms the basis of the so-called pool model. The paper also provid es an analysis of financial instruments proposed to complement nodal p ricing and includes illustrative test results on a large scale system. The second approach is based on cost allocation procedures proposed f or the so-called bilateral model. The paper explains the basis for thi s model including a game-theoretic evaluation of some of its aspects. Both the pool and bilateral models have been at the center of the elec tric utility restructuring debate in California.