Pricing and Settlement Approaches of Regional Electricity Markets in Multi-area Power Systems Considering Loop Flow Effects

Loop flows in multi-area interconnected power systems represent discrepancies between physical power flow and scheduled power transactions. We consider the impact of loop flow on the pricing and settlement of each regional electricity market in a multi-area system, and how to cover congestion rents of transmission lines. A locational marginal price (LMP) recovery approach has been developed to obtain global LMPs for regional market operators, and side payments associated with loop flow effects have been estimated. Numerical simulations confirm that congestion rent will be jointly covered among ISOs.