A more transparent way of financial settlement for congestion cost in electricity markets

This paper discussed the locational marginal price decomposition of financial settlement for congestion cost. The paper explains the underlying principles of LMP decomposition and enables the system operator to administrate the congestion cost in an efficient way for financial settlement and to provide a non-discriminatory transmission pricing to each market participant. Three LMP cost decomposition approaches are discussed and are illustrated on a simple six-bus system.