978-1-4244-1744-5/08/$25.00 ©2008 IEEE Keywords— transmission, congestion, auction, netting, simula- tion. Abstract--The allocation of cross-border transmission capaci- ties is a basic precondition for cross-border electricity trade. In- sufficient transmission capacities are the factor that limits this trade and therefore they must be allocated in the economically efficient manner in order to alleviate its negative influence on the trade but along with the preservation of electric power system stability. The flow-based coordinated auctioning method intro- duces economic criteria for selection of requests for transmission capacities use when those requests exceed available amounts (congestion), along with a better representation of cross-border electricity transactions influence on transmission network. With the use of internet development tools, web simulator has been created, which allowed practical implementation and testing of coordinated auctioning method, especially a possibility to apply netting of counter-flows. Several sensitivity analyses and case studies have been conducted and the results that show the advan- tages of application of netting principle are elaborated. I. INTRODUCTION HE interconnected control areas, managed by the Trans- mission System Operators (TSOs), gradually became zones with the high level of electricity transactions between them. Power flows over the cross-border tie-lines connecting those zones have to be limited to the maximal allowed value, related with the system stability and thermal limit of lines. Congestion that exists on specific cross-border interconnection is a clear indication of its economic value, and the entire pro- cedure known as Congestion Management consists of market- based payment for the allocation of transmission rights to par- ticipants who those scarce capacities value the most. In the flow-based coordinated auctioning method, auction for transmission rights is simultaneously organized on all cross-border interconnections, i.e. electrical borders between zones. Bids that consist of the requested power and a bid price are submitted in the pairs (from one source/input zone to an- other sink/off-take zone, which are not necessarily adjacent). The influence of each electricity transaction on every electrical border respectively is calculated using PTDF (Power Transfer Distribution Factor) matrix. For each electrical border, in both directions, technical limits that represent constraints on physi- cal flow over aggregated tie-lines on that border (Border Ca- pacity) are calculated. Optimization process, consisting of acceptation/rejection of bids, is solved using classic Linear Programming routine. This is, in fact, a well known problem of optimal allocation of scarce resources from the optimization theory. In order to maximise social welfare, scarce transmis- sion capacities should be allocated to the market participants who are ready to pay the highest price for their usage. Maxi- misation of the total auction income is not the goal on its own [1], as it could be misconceived, but only the instrument which helps that the efficient allocation of scarce transmission rights is accomplished. The flow-based coordinated auctioning method for the ex- plicit allocation of transmission rights is described in the sec- ond chapter of this paper, with the description of the technical parameters necessary for the calculations (PTDF matrix, BCs) and definition of optimization problem. Coordinated Auction Simulator (CAS), developed with the use of PHP and MATLAB, is described in the third chapter. By means of CAS, several simulations of coordinated auctioning are con- ducted with respect to the application of netting principle by Coordinated Auction Office (CAO) in the clearing process, but also by the auction participants during the bid submission. First of all, sensitivity analysis is conducted to see how change in transmission capacity on borders influences the auction results, and later on, how application of netting principle af- fects those results. If the netting principle (rights-with- obligations) is to be applied, flows against the direction of active constraints are regarded as creating additional transmis- Implementation aspects of partial netting in flow-based auction clearing mechanism Milan Vukasovic 1 , Mladen Apostolovic 2 , Christian Todem 1 1 Verbund - APG AG, Vienna, Austria Wagramer Straße 19, IZD Tower 1220 Vienna, Austria Phone: +43 (0) 50313-56154 E-mail: milan.vukasovic@verbund.at christian.todem@verbund.at 2 Energy Financing Team d.o.o., Belgrade, Serbia Bulevar Mihaila Pupina 10b/II Phone: +381 (0) 11 3011-031 11070 Belgrade, Serbia E-mail: mladen.apostolovic@eft-group.net T