Optimal Response of an Oligopolistic Generating Company to a Competitive Pool-Based Electric Power Market

The target of an oligopolistic generating company in a pool-based electric power market is to maximize its profits using two related instruments at hand: 1) its ability to modify the market-clearing price and 2) its capability to alter its own production level. Power balance is not an issue for the generating company; the independent system operator ensures power balance considering generator and demand bids through any market-clearing procedure. This paper proposes a mathematical model to determine the output of the generators owned by an oligopolistic generating company so that its profit is maximized for a one-day to one-week time horizon. An efficient solution technique to solve the resulting large-scale discontinuous nonlinear mixed-integer optimization problem is reported. A case study that illustrates the proposed model and the solution technique developed is analyzed in detail.