DSM economic marginal demand bidding

Asymmetric information in the electricity market creates incentive for customer aggregators (ESCOs, EMCOs, LSEs, etc.) to bid strategically as new information arrives. Such companies are pooling demand to provide enhanced services to customers. Since such demand pooling companies are not defined generically, all types of demand pooling companies will be termed demand serving company (DSC) to not confuse these with the existing company products and services. This paper considers strategic interaction between demand companies and the markets where energy is traded simultaneously in two or more markets. With information about the type of supplier bids in each market, a DSC´s cost can be implied from the market prices, demand timing, and quantity of demand. The complexity comes into play when one market is more transparent and liquid than another. Smart Grid equipment is a facilitator for such market play by DSCs. The question then is to determine how a DSC would bid given the expectations of its competitors and the suppliers on each market as well as the knowledge on physical characteristics of each system.