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, and 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 simple methodology based on the analysis performed by the Hydro One in-house computer program (PROCOSE) to calculate, for a given period of time, transmission congestion cost (TCC) in dollars per unit time and locational marginal pricing (LMP) in dollars per megawatt-hour (MWh) at any selected bus in the transmission system. In addition, the information provided by the program output on congested transmission elements is used to identify buses in the network whose LMPs are representative of the entire network. The computed LMPs at these buses are used to define zones in the network where each zone has its LMP. The proposed methodology can be used to carry out sensitivity studies 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) and the Hydro One network system.