A New Method for Merchandizing Surplus Allocation

Locational Marginal Pricing (LMP) is a method for energy pricing in deregulated power systems. Loss and congestion cause different prices at different buses. In this pricing method there is a different between payments of customers and revenue of generators which is called Merchandizing Surplus (MS). The Independent System Operator (ISO) receives MS and generally renders it to Transmission Company (Transco). It is rational that MS be allocated among power market participants fairly instead of granting whole MS to Transco. In this paper a novel method is proposed to allocate MS among market participants according to their role in the congestion of system. In the presented method by decomposing LMP and identifying congestion part of LMP, the part of generators’ revenue and customers’ payments which caused by congestion are calculated. Then MS is allocated among market participants as the payment of customers to be equal to revenue of generators. The proposed method has been tested on a five bus test system. Results indicate effectiveness of the proposed method to allocate MS between power market participants.