Electric Power Systems Research 54 (2000) 159 – 167 Structures and formulations for electric power auctions Somgiat Dekrajangpetch *, Gerald B. Sheble ´ Department of Electrical and Computer Engineering, Iowa State Uniersity, Ames, IA 50011, USA Received 26 February 1999; received in revised form 21 April 1999; accepted 17 August 1999 Abstract Various auction structures have been proposed for use in electric power markets throughout the world. Different auction structures are needed for different regions of the world. The available auction structures used presently may not be applicable in all regions that are restructuring to the price-based competitive environment. In addition, the auction structures used currently are being adjusted to improve the efficiency and suitability to those regions of the world in which restructuring has already taken place. This work illustrates various formulations for auctions when different structures of auctions are desired. Comprehensive formulations are developed for many more cases than previously available in the literature. This work clearly separates the cases based on commodity criteria and thus the formulations can be easily modified for other cases that are not presented in this work. © 2000 Published by Elsevier Science S.A. All rights reserved. Keywords: Auction formulation; Auction structure; Bilateral contracts; Heterogeneity; Homogeneity; Reservation price www.elsevier.com/locate/epsr 1. Introduction Restructuring of the electric power industry has al- ready taken place in some countries and is taking place in some other countries in the world. In the US, the restructuring process has already taken place in Califor- nia and is taking place in some other states, e.g. New York, New England, Michigan, and Pennsylvania-New Jersey-Maryland (PJM). The restructuring is to move away from cost-based monopolistic environment of the past to priced-based competitive environment of the future. The purpose of the restructuring is to promote competition. Auctions are considered to be a good pricing mecha- nism for competitive markets. There have been various auction structures proposed for electric power markets. The major types of auctions for electric power can be classified into centralized daily commitment auctions (CDCAs) and single period commodity auctions (SP- CAs). An example of a CDCA is the power pool auction as implemented in the United Kingdom and some portions of the United States [1]. An example of a SPCA is the electric power auctions used in New Zealand [2]. The more detailed characteristics of CD- CAs and SPCAs are described in section three. The methods for matching bids in auctions are based on optimization techniques. Various auction structures may be implemented properly and efficiently with dif- ferent optimization techniques. The power pool auction (CDCA) in the United Kingdom is implemented by LaGrangian relaxation (LR) while the SPCA in New Zealand is implemented by advanced dual simplex and interior-point methods. LR, interior-point linear pro- gramming (IPLP), and upper-bounded linear program- ming (UBLP) have been programmed to implement various types of auctions [3]. The theme of this work is to illustrate various math- ematical formulations for auctions when different auc- tion structures having various characteristics are desired. The focus of this work is on SPCAs and thus the formulations illustrated are for SPCAs. However, the formulations illustrated can be enhanced easily to be used with CDCAs. The formulations of a few cases have been presented in previous research [4 – 7]. How- ever, this work presents formulations for many more comprehensive cases. In addition, this work clearly separates the cases based on commodity criteria and thus the formulations can be easily modified for other cases that are not presented in this work. Section two describes the market framework used in this work. Section three describes CDCAs and SPCAs. * Corresponding author. 0378-7796/00/$ - see front matter © 2000 Published by Elsevier Science S.A. All rights reserved. PII:S0378-7796(99)00068-1