Avoiding congestion charges in spatial electricity competition. I. Theoretical formulation

We present a spatial gaming model that can avoid congestion charges to producers in deregulated electricity markets. This is accomplished by letting each flow limit equal the actual flow limit minus a very small positive number ε. As a result, both congestion and congestion charges are avoided. DC power flow equations are included for representing the physical laws of electrical networks. We also establish the mathematical equivalence between the narrow sense (NS) Pareto optimum and a Nash equilibrium and the analysis is based on the Kuhn-Tucker vector optimization theorem and convexity of the problem formulation.