Bilateral contract correction and cancellation in the competitive electricity markets

Bilateral forward contracts are widely applied in the electricity markets. Conclusion of bilateral contracts bears certain risks due to price and demand uncertainty. Both contract parties forecast price levels in the spot market and electricity demand. Both parties estimate expected profits (or losses) from caring out the contract and participation in the spot market. It is important to correct the contract in time. The paper considers the sequence of actions to be implemented for contract correction. The statements of optimization problems are given for decision making on contract correction and cancellation. The statements take into account financial compensation for another party in the case of prescheduled contract correction or cancellation. Numerical example illustrates applicability of the proposed procedures for decision making.