Congestion Management with Ex Ante Pricing for Decentralized Electricity Markets

We present a method and a model for managing transmission congestion based on ex ante congestion prices. Our method is influenced by the yield management approach widely used for airline reservation systems, and our model is built based on the relations between transmission congestion prices and electricity commodity prices that exist for an optimal solution. We formulate the congestion pricing problem as a master problem and the electricity commodity (energy and reserve) pricing as subproblems. Examples are presented to illustrate how a system operator can use this approach to compute ex ante congestion prices and how market operators can determine clearing prices and schedules of forward electric energy and reserve markets.