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Title: Heuristic approach to price CAP setting for generation companies in electricity markets
Authors: Xu, N
Wen, F
Ngan, HW
David, AK
Keywords: Electricity bidding
Electricity market
Generation company
Price cap
Issue Date: 2003
Publisher: 電力工業部南京自動化硏究所
Source: 电力系统自动化 (Automation of electric power systems), 2003, v. 27, no. 13, p. 19-23 How to cite?
Journal: 电力系统自动化 (Automation of electric power systems) 
Abstract: Price cap is widely enforced in many operating electricity markets worldwide to limit the exercising of market power by generation companies and to reduce the financial risks of transmission companies, especially in those markets employing the well-known single-buyer model with retail electricity prices fixed. The problem of setting an adequate price cap for generation companies is investigated, from the standpoint of the regulatory organization, and a heuristic method proposed following the ex post approach. First, based on actual historical data of the market clearing price (MCP) and the traded volume of electricity in each auction round for a studied period, such as the past one year, the probability distribution function of the MCP could be identified and represented as a function of the price cap. Then, the adequate price cap could be estimated based on the presumably known average cost of the transmission service and the retail electricity prices.
ISSN: 1000-1026
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