Interface definition and pricing for economic and efficient interchange transactions

Correct interface definition and pricing is essential to address uncertainty and schedule economic and efficient interchange transactions between Regional Transmission Organizations (RTOs) or between RTOs and non-market entities, e.g. Tennessee Valley Authority (TVA). Incorrect interface prices cannot reflect the true incremental system dispatch cost or decremental system production cost savings, thus resulting in inefficient interchanges that flow from higher-cost regions to lower-cost regions, as well as uneconomic transactions that were charged more for the export and credited less for the import, or vice versa. Also, correct interface pricing is a key role leading to the joint optimal dispatch between two RTOs, e.g. Midcontinent Independent System Operator (MISO) and PJM Interconnection (PJM). This paper proposes and summarizes new designed solution methodologies aiming to resolve interface pricing related issues and thus improve electricity market efficiency and performance.