Addressing grid issues in transitional deregulated systems

The purpose of this paper is basically twofold, first to carry out a contextual review of network congestion issues in transitional deregulated power systems; secondly to ascertain and device some useful instrument to be able to deal with these issues. There is an emphasis on transmission congestion fundamentals and congestion management (CM) approaches. The CAISO energy system is currently transitioning into a more standard market design (SMD) termed market redesign upgrade initiative (MRTU). Its key principles are reviewed, particularly as they have an impact on transmission service, costs and hence on CM. Based on the prospective utilization of locational marginal price (LMP), an evaluation idea to deal with congestion costs hedging is presented. The basis for this methodology can be found as an extension of previous work dealing with ancillary services (A/S) assessment. As in this latter case the application to some transmission financial securities stems from option valuation theory. A numerical example with a five-bus system is provided; the process requires running load-flow cases to identify performance and congestion contingency patterns, as required for transfer capacity standpoints. The simulations contain simple cost functions enabling a nodal LMP