Under a deregulated environment, electricity consumers and suppliers generally establish various bilateral power transactions/contracts. The transmission company normally honors and executes these bilateral contracts within the limits permitted by the system design and operating conditions. This article describes determination of optimal bilateral contracts by using line flow factors (LFFs). An innovative approach for obtaining the set of line flow factors is presented. The line flow factors are evaluated from existing load flow information. A generalized linear programming formulation is proposed to determine the optimal bilateral real power contracts under a deregulated environment subjected to the steady-state security constraints (e.g. generation and line flow limits). It is demonstrated that the proposed methodology would be an effective tool to study the intricate relationships between the bilateral contracts and system security. Examples are presented to illustrate the use of this formulation to minimize the cost of any bilateral contract to comply with the security requirements. The results obtained show great prospects for practical application of the proposed algorithm for optimal bilateral contracts on a real-time basis.
The open access transmission regime is spearheading the rapid disintegration of the well-entrenched vertically integrated structure of the electric power industry. The entry of a large number of new players and the unbundling of electricity services has pushed the industry toward the widespread use of transactions to meet customer demands [1] and [2]. The driving forces of deregulation are aiming to establish a more competitive market in order to achieve lower rates for the consumers and higher efficiency for the suppliers. Power suppliers, both the conventional utilities as well as the Independent Power Producers (IPP), are actively competing with one another for acquiring customers. The consumers can therefore establish various service contracts with any supplier in order to obtain the lowest rate and most desirable service [3] and [4].
In a deregulated electricity market, the task of the independent system operator (ISO) is to ensure that contracted power transactions are carried out reliably. However, due to the large number of transactions that take place simultaneously, transmission networks may easily get congested. A number of methods, both technical and economical, dealing with congestion management in deregulated electricity markets, have been proposed in the literature. The technical methods are generally based on optimal generation re-dispatch with security and transmission constraints, operation of transformer taps, outage of congested lines, load curtailment, and operation of Flexible AC Transmission System (FACTS) devices.
Three different methods of operation of transmission system in deregulated power systems are discussed in [5]. The first is based on optimal power flow (OPF), as implemented in the UK, parts of USA, Australia, and New Zealand. The second method is the point-of-connection tariff and price area congestion model as used in Sweden and Norway, respectively. Finally, a transaction-based model as used in the USA is discussed. Each method succeeds in maintaining power system security, but differs in its impact on the economics of the energy market. In [6], a minimum-distance generation re-dispatch is proposed, which disregarded the economic value of the transaction adjustment. In [7], price (marginal cost) signal is used for the generators to manage congestion and the solution under rational behavior assumption is found to be identical to an OPF solution. A similar approach is suggested for the pool model [8], where the cost of congestion is bundled within the marginal cost at each bus. A bilateral model is also investigated, and a congestion cost minimization approach is proposed [9], [10] and [11]. A new unified method which allocates transmission losses either to buses in a pool market or to individual transactions in a bilateral contract market is presented in [12]. In [13] an optimal power flow formulation in which the generation is dispatched in order to compensate for losses allocated to different transactions is presented. In [14] a new approach to the transmission loss allocation problem in a deregulated system is presented. This approach belongs to the set of incremental methods. It treats all the constraints of the network, i.e. control, state and functional constraints. In [15] a new approach for transmission pricing is presented. The contribution of a contract on power flow of a transmission line is used as extent-of-use criterion for transmission pricing.
In this paper, a new concept called line flow factors has been developed to evaluate the network-constrained optimal bilateral transactions/power contracts. The developed framework is conceptually simple and can directly evaluate the optimal bilateral contracts with respect to power generation/load at all buses. A generalized linear programming formulation has been proposed to determine the optimal bilateral real power contracts under a deregulated environment subjected to the steady-state security constraints. The results of sample four-bus system and 24-bus practical system have been presented under simulated conditions to illustrate the use of this formulation to minimize the cost of any bilateral contract to comply with the security requirements. It has been demonstrated that the proposed methodology would be an effective tool to study the intricate relationships between the bilateral contracts and system security.
