A methodology for evaluating the wholesale/retail prices in deregulation market

This paper aims to establish a methodology for evaluating the wholesale or retail prices in a power market which ensures not only the recovery of expense for utilities or regional networks but also provide reasonable electricity prices for consumers, reflecting the market competition. In the power market under consideration, it is assumed that there are multiple IPPs (independent power producers) bidding electric power to a utility or regional network, and that the utility supplies electric power to customers by a fixed transmission network. Bidding curves or prices are the given conditions for the utility because they are independently determined by individual IPP. In addition to the power supplied by IPPs, the utility may or may not have its own generation capacity. With both bids by IPPs and its internal generation capacity, the utility is to decide the retail or wholesale electricity prices for customers. In this project, first a comprehensive model that truly reflects the competitive relations among IPPs, the utility and customers is proposed. Secondly, an electricity price assessment that can ensure both the maximal expense recovery for the utility and the minimal (most economical) cost for consumers is derived, this price-deriving objective are formulated mathematically as a nonlinear optimization problem. An algorithm for solving the optimization problem is also developed based on the mathematical programming technique.