Equitable allocation of congestion relief cost to transactions

This paper investigates a bid based congestion management scheme for a system that accommodates many bilateral transactions. The paper proposes a new allocation method for allocating the cost of congestion relief to transactions that cause the congestion. The allocation reflects the actual usage of the congested facilities by the transactions and recovers the cost. Also proposed in the paper is a “consistency” test to quantify and test the equity/fairness of the method. Test results illustrate that the method provides better price signals for relieving congestion on lines than the shadow prices. The test results also indicate that the method recovers the cost. The results on consistency indicate that the proposed method is consistent provided that the transactions causing counterflows on congested lines be compensated