Pricing and operation in deregulated electricity market by noncooperative game

Pricing structure is becoming considerably important for both electric utility industries and their customers. This paper derives an operation rule for a market model with an electric utility and independent power producers (IPPs) as players of the noncooperative game. The derived operation rules reflecting the competition can be viewed as an extension of the conventional equalizing incremental cost method for the deregulated power systems. As indicated in this paper, the prices of electricity for purchases and sales are equal to the incremental costs of the generators of IPPs but are generally cheaper than the incremental cost of the generators belonging to the utility. To examine the proposed approach, several systems are used as the demonstrated examples in this paper.