The dynamics and mechanisms of bidding by electricity generators to supply
electricity to a national grid are investigated. A mathematical model for t
he bidding process is developed and the generators are assumed to act ratio
nally according to the "maximize expected utility" principle. The model and
system objectives are interpreted as a classical control problem and resul
ts, simulated and analytical, are presented. The results show that by intro
ducing multiple bidding rounds, convergence to a Pareto optimum is possible
if a proportional-integral control policy is introduced.