Marginal cost computation using simulated annealing

Electric utilities are undergoing a great change. Within the general trend, of electrical field, seeking economical efficiency, most markets are or will be entirely open to competition in the near future. For such competitive markets, prices will be a strategical issue ruled by the objective of optimizing networks from the point of view of resources and pricing. Regulators are also needed to guarantee the welfare of consumers and producers surplus. Marginal cost (MC) pricing became the centre of any economic evaluation of transmission and distribution services. The optimization problem is a nonlinear one with the inherent computation difficulties associated. In this approach we propose a simulated annealing methodology, that is a powerful technique to solve combinatorial optimization problems, to compute the optimal average electrical marginal costs of a transmission and distribution network. We also prove that this method can easily adapt to any specific regulation under different regulatory viewpoints.