A Medium-Term Decision Model for DisCos: Forward Contracting and TOU Pricing

Time varying prices by motivating customers to reduce their consumption in peak periods propel the electricity industry towards a higher efficiency compared to that of common flat prices. Focusing on time-of-use (TOU) sale prices, this paper establishes a stochastic model for the medium-term decision making problem faced by a distribution company (DisCo). The developed model deals with the DisCo´s decisions on the level of involvement in forward contracts and in the pool as well as the sale prices offered to customers. The demand response to TOU prices is captured using a price elasticity matrix (PEM). The objective is to maximize the DisCo´s profit while the exposure risk imposed by uncertainties is limited to a given level. The model is formulated as a mixed integer linear programming (MILP) problem that can be effectively solved via commercial software packages. A typical Finnish 20-kV urban distribution network is used to demonstrate the effectiveness of the developed model.