Optimal Pricing Mechanism for Generators and Large Consumers Considering Power Transmission Cost

The pricing mechanism in a deregulated electricity market is a key issue to achieve complete electricity market and high market efficiency. With development of electricity market, large consumers may purchase electric power from generators. In this paper, we introduce McAfee´s second-price sealed auction mechanism into multi-unit electric power transaction between generators and large consumers. A model to form electric power price between generators and large consumers considering the transaction cost and power transmission cost in a poolco-type electricity market is presented. After describing pricing rules in the deregulated power market, clearing rules and transaction rules are given, in which clearing rules can increase the probability that generators providing a large number of supply and large consumers with high demand win the auction, transaction rules can optimize the whole transmission cost and transaction cost under market equilibrium. A numerical example with eight generators and eight large consumers serves to illustrate the essential features of the method.