The impact of transmission on imperfect electricity competition

This paper investigates the impact of transmission networks on imperfect competition in deregulated electricity markets. Electricity producers are assumed to engage on a noncooperative gaming with complete but imperfect information. The problem is formulated as a vector profit optimization model. It shows that increasing wheeling charges can both increase market prices and reduce producers' profits, a phenomenon that cannot be explained by a nonspatial framework. Transmission limits have a significant impact on outcomes of market gaming, indicating that reducing transmission congestion would mitigate market power.