From the volume „Development of electricity markets”, Edition: „The European power supply industry”, Technical University of Lodz, April 2005 1 Modern Commitment and Dispatch in the Balancing Market S. Kasprzyk W. Mielczarski CEO, PSE-Operator Technical University of Lodz. 1. Introduction The operation of the power system in the market environment requires a new approach to methodologies on system operation in particular on commitment and dispatch of power generating units. The approach to commitment and dispatch is frequently driven by the security of the system operation and in many cases transmission system operators stick with routine procedures modified to market conditions. In some cases, the development of balancing market rules is constrained by the existing operation procedures and software used. The introduction of the common European electricity market creates a need for the modification of two crucial elements of the balancing market operation: commitment and dispatch of the generating units, and congestion management. This chapter describes the universal approach to commitment and dispatch in the balancing market. The methodologies have been successfully implemented in the Polish electricity market in 2001 and after nearly four years in operation have demonstrated many advantages. The experience shows that after some modification the method proposed can be easily implemented in any electricity market structure. It can used as a uniform approach allowing for consistent market operation procedures. 2. Historical background When the electricity market structure was approved in 1999 in Poland, there was pressure to quickly implement the electricity market [1]. The Power Exchange was established in June 2000 however the balancing market was not ready for operation until September 2001. The balancing market operation required new computer software which would be able to prepare commitment and dispatch using balancing bids submitted by generating units, taking into account the network constraints and the technical characteristics of over 100 generating units. Two systems: LPD and GMOS were designed and constructed in 2000 for a day ahead balancing market. However, their implementation had to wait for the development of telecommunication infrastructure. The balancing market started its operation with new systems for commitment and dispatch on 1st September 2001. It has been working successfully ever since. The power operation planning is based on two systems. The first one Linear Programming Dispatch is the software for linear-binary optimization based on the balancing bids submitted by generating units. The second one GMOS is the data base for the network constraints represented by nodal constraints. The operation of the balancing market includes several stages [2]. First, it verifies the consistency of contract positions and the bids submitted. Secondly,