A Study of the Transmission Price Conjecture in an Oligopolistic Power Market

Abstract

This paper presents a conjectured supply function (CSF) equilibrium models of oligopolistic competition among electricity producers formulated as mixed linear complementarity problems (MLCP). Similar to the conjectured supply function approach, a conjectured transmission price (CTP) response function is formulated in order to model how generating companies can influence the transmission price. The model simulates a bilateral market design based on a point-to-point transmission pricing scheme corresponding to the locational marginal pricing (LMP) based congestion management. The focus of this paper is to study the outcome of the market equilibrium by a stepwise increase of each strategic generator's CTP response parameter. An estimation of this parameter will not be within the scope of this paper. The results show that strategic generators behave more profitably when they have some information about how to affect transmission prices. However, depending on where they are located with respect to the congested transmission line, they pursue different policies in terms of manipulating congestion prices. A three-node network is presented to illustrate the application.