Optimal power transactions with network constraints in deregulated systems

In this paper a methodology is presented to compute the optimal inter-utility power interchange in deregulated power systems. Cost functions in utilities are considered proprietary information. Each utility defines a price curve for the import and export interchange. The problem is formulated as an optimization approach with a nonlinear objective function and linear constraints. Electric losses are considered in the solution using penalty factors. The Values of the penalty factors are calculated from a DC power flow. The results for a three-area test system are presented.