Combined pool/bilateral operation. III. Unbundling costs of trading services

For pt. II see ibid., vol.17, no.4, p.1184-90 (2002). Some of the various services provided under mixed pool/bilateral electricity trading are (i) power to satisfy bilateral contract demand; (ii) power for transmission losses and congestion management due to bilateral contracts; (iii) power for transmission losses and congestion management due to wheeling contracts; and (iv) power for transmission losses and congestion management due to pool demand. A procedure is developed and tested to unbundle these MW services as well as their corresponding costs, thus allowing the calculation of the average cost of each service. Comparison of the average and marginal costs serves to evaluate the relative profitability of each service. The goal of these results is to help generator and load-serving entities choose appropriate relative levels of pool versus bilateral trades while considering risk, economic performance, and physical constraints.