Alternative pricing rules

This paper presents three alternative pricing rules for electricity markets. Uniform pricing is the most common in electricity markets, because all accepted prices are paid the market clearing prices. Pay-as-bid pricing is suggested to avoid the exercise of market power under uniform pricing. In pay-as-bid pricing, all accepted offers are paid the offered prices. Under Vickrey pricing, large bidders effectively are bribed not to exercise market power. The costs nonconvexity is overcome by hybrid pricing that is a blend of both uniform and pay-as-bid pricing. Thus, the bidding incentives vary from unit to unit depending on how likely it is that the daily energy profits will cover commitment costs.