Interruptible Physical Transmission Contracts for Congestion Management

This paper presents a novel congestion management protocol applicable for both purebilateral and hybrid market structure. The mechanism is based on an Interruptible Physical Transmission Contract, which guarantees physical access to the transmission network users and provides financial incentives for the bilateral contract holders to forfeit the physical access to the transmission network. The contract specifies a financial reimbursement payable to the insured if the system operator dispatch requires a curtailment of a bilateral contract involving an injection into and withdrawal of power at a specified set of nodes. The insurer is compensated in the form of an insurance premium for providing the service. The contract is structured such that the reimbursement payable to the insured party equals the actual loss incurred so that the insured party is “made whole” with the insurance payment. Similarly, when the insurer is the System Operator itself, it tries to dispatch the generators such that the aggregate insurance reimbursements payable to the insured parties is minimized. In this way, the transmission contract mechanism ensures that a near optimal curtailment policy coincides with the efficient dispatch in the system.