Assessment of transmission congestion cost and locational marginal pricing in a competitive electricity market

In an open access environment, transmission constraints can result in different energy prices throughout the network. These prices are, in fact, dependent on a number of factors such as the generating unit bid, system load level, network topology and security limits imposed on the transmission network due to thermal, voltage and stability considerations. Computing these energy prices at all buses in large transmission networks under given system operating conditions can be time consuming. This paper describes a methodology based on the analysis performed by the Hydro One inhouse computer program to calculate transmission congestion cost (TCC) and locational marginal pricing (LMP) in transmission systems. The assessment methodology is simple and efficient and computes LMPs at selected buses that represent the entire network. The proposed method can be used to compute hourly TCC and LMPs as well as average values over a specified period of time. Sensitivity studies are carried out to determine the impact of changes in system parameters and operating conditions on the LMPs. The proposed method is illustrated using the IEEE Reliability Test System (RTS).