Uplift Generation Cost Allocation in Pay-as-Bid Markets with Congested Transmission Networks

The re-dispatch of scheduled generation units is used by system operators to alleviate network congestion for attending load balance and maintaining the secure state of the system. This procedure implies additional costs due to units\´ out of merit operation. In some systems, because of contractual terms, generators are reimbursed for producing or not as scheduled. In systems under pay-as-bid market model, the re-dispatch congestion cost is generally compensated by charging the consumption agents a "congestion uplift", which is allocated in a pro-rata manner. In this paper, a new strategy for allocating the uplift congestion cost is presented. The model is based on the principle of equivalent bilateral exchanges-EBE. The advantage is the possibility of incorporating the concept of "pay-as-used" a service among agents, considering the transmission network. Numerical tests show comparatively the presence of cross-subsidies produced by the normally used pro-rata method which are not present in the suggested approach