LBMP

Locational Based Marginal Pricing .
NYISO
Market Operations
the cornerstone
of the NYISO
Market Operation
LBMP
Objectives to Understand:
Basics of Locational Based
Marginal Pricing (LBMP)
LBMP and Impact of Congestion
LBMP Specifics
LBMP Energy Market

(Load)
Bid
s
s
r
e
f
f
O
Load Serving Entities (LSEs) provide bids to

purchase energy.
Power Suppliers/Generators (Gen) provide offers
to sell energy.
LBMP Energy Market

(Load)
Bid
s
s
r
e
f
f
O
Energy Sales and Purchases are

scheduled directly through the NYISO
Price of energy is based on the Market
Clearing Price or Locational Based
Marginal Pricing (LBMP).

1. A methodology where the price of Energy at
each location in the NYS Transmission System
is equivalent to the cost to supply the next
increment of Load at that location.
2. NYISO takes into account:
Generation Offer Prices
Physical aspects of the NYS Transmission
System
Lets simplify the definition and use the following:
The cost to serve the next MW of Load

at a specific location in the grid
Before we start lets review the

following definitions..
Definitions - Simplified
Energy - A quantity of electricity that is bid,
produced, purchased, consumed, sold, or
transmitted over a period of time, and
measured or calculated in megawatt hours.
Load - Energy demands on the power grid.
Load Serving Entity (LSE) - An entity that
supplies Energy to retail customers.
Generator or Power Supplier - A facility

capable of supplying Electric Energy
Definitions - Simplified
Bus - A common connection of two or
more electric circuits within a station.
Transmission Line - Conductors for
transmitting electric power
Transmission Constraint - Limits on the
ability of the Transmission Grid to transmit
energy. Recognition of Transmission
Constraints is necessary to maintain
reliable operation of the Transmission
System.
Zone - Geographical areas reflecting the
Transmission Owners traditional service
territories and External Control Areas
Next we are going to define and demonstrate .
Marginal Pricing
the cost to serve the next MW of load
Using Economic Dispatch
Economic Dispatch:
1. Determine the least costly way of producing
electric energy to meet the load
2. The price of producing an additional MW in a
specific location in the grid is called the
Locational Based Marginal Price (LBMP).
3. The LBMP will be the same at all buses when:
Transmission limits are not reached

Transmission Limits are not exceeded
Losses are zero (Losses to be addressed later)
West
2 Zones
2 Zones (Geographical Area):

West and East
Buffalo-Albany Line
Buffalo
Gen#1
MW
$/MWh
East
2 Buses, Buffalo &
Albany, connected by
a Transmission Line
Albany
Note the arrows,
Generators
supply energy
Gen#2
MW
$/MWh
Transmission Line
Load A
MW of
Load
Load B
Note the arrows,
Load withdraws
energy
MW of
Load
The Generator MW capacity is displayed in black .
Gen#1
MW of Capacity
Offer
Price
$/MWh
When the Generator is selected to meet the load,

the number of MW selected is shown in blue .
Gen#1
MW of Capacity
MW selected to $/MWh
meet Load
Assumptions:
Simple 2 Bus, 2 Zone Examples
No Transmission Limits
No Transmission Losses - These

will be discussed later
West
East
Buffalo
Gen#1
100 MW
$25
Albany
Gen#2
100 MW
$45
Load A
Load B
10 MW
20 MW
Step 1:
Determine the Total Load
West
East
Buffalo
Gen#1
100 MW
Albany
Gen#2
$25
100 MW
$45
Load A
Load B
10 MW
20 MW
Total Load is 30 MW
West
Total Load
30 MW
Buffalo
Gen#1
100 MW
$25
East
Albany
Gen#2
100 MW
$45
Load A
Load B
10 MW
20 MW
Step 2:
Select the most economic Generation
West
Total Load
30 MW
Buffalo
Gen#1
100 MW
$25
East
Albany
Gen#2
100 MW
$45
Load A
Load B
10 MW
20 MW
Gen #1 is the cheapest and

can provide up to 100 MW
West
Total Load
30MW
Buffalo
Gen#1
100 MW
$25
East
Albany
Gen#2
100 MW
$45
Load A
Load B
10 MW
20 MW
Step 3:
Select the MW Gen#1 can provide to

meet the load
West
Total Load
30MW
Buffalo
Gen#1
100 MW
30 MW
$25
East
Albany
Gen#2
100 MW
$45
Load A
Load B
10 MW
20 MW
Gen #1 can provide up to 100 MW

Gen #1 provides 30 MW to meet the Load
West
Total Load
30MW
Buffalo
Gen#1
100 MW
30 MW
$25
East
Albany
Gen#2
100 MW
$45
Load A
Load B
10 MW
20 MW
Step 4:
Determine if all of the Load is met.
West
Total Load
30MW
Buffalo
Gen#1
100 MW
30 MW
$25
East
Albany
Gen#2
100 MW
$45
Load A
Load B
10 MW
20 MW
Total Load is 30 MW
Gen #1 provides 30 MW
Total Load is met
West
Total Load
30MW
Buffalo
Gen#1
100 MW
30 MW
$25
East
Albany
Gen#2
100 MW
$45
Load A
Load B
10 MW
20 MW
Step 5: Determine the MWs that are transmitted

over the Buffalo/Albany Line
Total Load
30MW
West
Buffalo
Gen#1
100 MW
30 MW
$25
10 MW
Load A
10 MW
East
Albany
Gen#2
20 MW
100 MW
$45
20 MW
Load B
20 MW
20 MWs are transmitted over the Buffalo/Albany Line
West
Total Load
30MW
Buffalo
Gen#1
100 MW
30 MW
$25
East
Albany
Gen#2
100 MW
$45
Load A
Load B
10 MW
20 MW
Step 6:
Determining the LBMP ..
West
Total Load
30MW
Buffalo
Gen#1
100 MW
$25
30 MW
East
Albany
Gen#2
100 MW
$45
Load A
Load B
10 MW
20 MW
Determine the cost to serve the

next MW of load.
West
Gen#1
100 MW
$25
30 MW
Buffalo
Albany
East
Gen#2
100 MW
$45
Load A
Load B
10 MW
20 MW
Lets see which generator would be selected if

the Total Load changed to 31MW .
Total Load
31MW
West
Buffalo
Gen#1
100 MW
31 MW
$25
11 MW
Load A
11 MW
East
Albany
Gen#2
20 MW
100 MW
$45
20 MW
Load B
20 MW
If the load in the West increased by 1 MW

Gen #1 will be dispatched to provide an
additional MW at $25/MW
Total Load
31MW
West
Buffalo
Gen#1
100 MW
31 MW
$25
10 MW
Load A
10 MW
East
Albany
Gen#2
21 MW
100 MW
$45
21 MW
Load B
21 MW
If the load in the East increased by 1 MW

Gen #1 will be dispatched to provide an
West
Total Load
31MW
Buffalo
Gen#1
100 MW
East
Albany
Gen#2
$25
100 MW
30 MW
$45
Load A
Load B
10 MW
20 MW
Regardless where the load increased Gen #1 will be

dispatched to provide an additional MW at $25/MW
LBMP = $25/MW
West
Total Load
30MW
Buffalo
Gen#1
100 MW
$25
30 MW
East
Albany
Gen#2
100 MW
$45
Load A
Load B
10 MW
20 MW
Generator #1 can provide the next MW of load at

$25/MW
LBMP = $25/MW for the West Zone and the East Zone
Total Load
30MW
West
Buffalo
Gen#1
100 MW
$25
30 MW
East
Albany
Gen#2
100 MW
$45
Load A
Load B
10 MW
20 MW
LBMP (West) =
$25/MWh
LBMP (East) =
$25/MWh
Total Load
30MW
West
Buffalo
Gen#1
100 MW
$25
30 MW
East
Albany
Gen#2
100 MW
$45
Load A
Load B
10 MW
20 MW
Determine the Total Load.
West + East =
10 MW + 20MW =
Select the Most Economic

Generation to meet the Load.
Total Load = 30 MW
Generator #1
$25 < $45
Determine the Cost of serving

the Next MW of Load.
Generator #1 can
serve the next MW
30 MW
$25/MWh
Example 2
LBMP with No Congestion
Assumptions:
No Transmission Constraints
No Transmission Losses (to be discussed

later)
West
East
Buffalo
Gen#1
100 MW
Albany
Gen#2
$25
100 MW
$45
Load A
Load B
60 MW
90 MW
What is the Total Load?
1. 60 MW
2. 100 MW
3. 150 MW
4. 90 MW
West
East
Buffalo
Gen#1
100 MW
$25
Albany
Gen#2
100 MW
$45
Load A
Load B
60 MW
90 MW
Total Load is 150 MW
West
Total Load
150 MW
Buffalo
Gen#1
100 MW
$25
East
Albany
Gen#2
100 MW
$45
Load A
Load B
60 MW
90 MW
Select the generator that is the most economic (cheapest):

1. Gen #1
2. Gen #2
3. Load A
4. Load B
West
Total Load
150 MW
Buffalo
Gen#1
100 MW
$25
East
Albany
Gen#2
100 MW
$45
Load A
Load B
60 MW
90 MW

West
Gen#1
100 MW
$25
100 MW
Total Load
150 MW
Buffalo
Albany
East
Gen#2
100 MW
$45
Load A
Load B
60 MW
90 MW
If Gen #1 is selected for 100 MW how many MW will

cross the Buffalo/Albany Line?
1. 40 MW
2. 60 MW
3. 100 MW
4. 90 MW
West
Gen#1
100 MW
Total Load
150 MW
Buffalo
Albany
Gen#2
$25
100 MW
100 MW
60 MW
East
40 MW
100 MW
$45
Load A
Load B
60 MW
90 MW
If Gen #1 provides 100 MW (Full Capacity);

60 MW to meet Load A
40 MW will go across the Buffalo/Albany Line
West
Gen#1
100 MW
Total Load
150 MW
Buffalo
Albany
Gen#2
$25
100 MW
100 MW
60 MW
Load A
60 MW
East
40 MW
100 MW
$45
40 MW
Load B
90 MW
Continuing with the same example:

40 MW cross the Buffalo/Albany Line to Load B
Load B is 90 MW.
Still need to serve 50 MW Load in the East
West
Gen#1
100 MW
Total Load
150 MW
Buffalo
Albany
$25
100 MW
100 MW
60 MW
Load A
60 MW
40 MW
East
50 MW
Gen#2
100 MW
$45
50 MW
90 MW
Load B
90 MW
Gen #2 can provide the 50 MW to meet

the remaining 50 MW Load in East .
Total Load of 150 MW is met
West
Total Load
150 MW
Buffalo
Gen#1
100 MW
100 MW
$25
East
Albany
Gen#2
100 MW
50 MW
$45
Load A
Load B
60 MW
90 MW
Lets see which generator would be selected if

the Total Load changed to 151MW .
West
Gen#1
100 MW
Total Load
151 MW
Buffalo
Albany
$25
100 MW
100 MW
61 MW
Load A
61 MW
39 MW
East
Gen#2
100 MW
51 MW
$45
51 MW
90 MW
Load B
90 MW

Gen #2 would be dispatched to provide an
West
Gen#1
100 MW
Total Load
151 MW
Buffalo
Albany
$25
100 MW
100 MW
60 MW
Load A
60 MW
40 MW
East
Gen#2
100 MW
51 MW
$45
51 MW
91 MW
Load B
91 MW

Gen #2 would be dispatched to provide
an additional MW at $45/MW
West
Gen#1
100 MW
$25
100 MW
Load A
60 MW
Total Load
150 MW
Buffalo
Albany
East
Gen#2
100 MW
$45
50 MW
Load B
90 MW
Regardless of where the load increased Gen #2

would have to provide an additional MW at $45/MW
LBMP = $45/MW
West
Gen#1
100 MW
Total Load
150 MW
Buffalo
Albany
East
Gen#2
100 MW
$25
$45
50 MW
100 MW
Load A
Load B
60 MW
90 MW
West + East =
60 MW + 90 MW =

Total Load = 150 MW

$25 for first 100 MW
$45 for next 50 MW

Generator #2 can
serve the next MW
150 MW
Generator #2
$45/MWh
West
Gen#1
100 MW
Total Load
150 MW
Buffalo
$25
100 MW
Load A
60 MW
LBMP (West) =
$45/MWh
Albany
East
Gen#2
100 MW
$45
50 MW
Load B
90 MW
LBMP (East) =
$45/MWh
West
Gen#1
100 MW
$25
100 MW
Load A
60 MW
Total Load
150 MW
Buffalo
Albany
East
Gen#2
100 MW
$45
50 MW
Load B
90 MW
Total Load = 150 MW

Generator #2 is the Marginal Unit
Generator that would serve the next MW of load.
The last two examples showed the Marginal Pricing of LBMP and the
process of Economic Dispatch
All of these examples had no Transmission Constraints on the
Transmission Lines resulting in equal LBMPs for both buses.
In the real world transmission limits exist! Now we are going to add
Transmission Limits to the remaining examples.
Marginal Pricing
the cost to serve the next MW of load
Using Economic Dispatch

Transmission Constraints
To maintain an efficient and reliable Transmission

System we need to ensure Transmission System Limits
are not exceeded.
Example 3
LBMP with
Transmission Limits
And No Congestion
Assumptions:
Transmission Constraint of 50 MW
No Transmission Losses
West
East
Buffalo
Albany
Gen #1 $25
100 MW
Gen #2 $30
100 MW
Gen #4 $40
100 MW
Gen #3 $50
100 MW
Load A
Load B
80 MW
140 MW

1. 80 MW
2. 140 MW
3. 200 MW
4. 220 MW
West
Total Load
220 MW
Buffalo
East
Albany
Gen #1 $25
100 MW
Gen #2 $30
100 MW
Gen #4 $40
100 MW
Gen #3 $50
100 MW
Load A
Load B
80 MW
140 MW
Total Load is 220 MW
West
Total Load
220 MW
Buffalo
East
Albany
Gen #1 $25
100 MW
Gen #2 $30
100 MW
Gen #4 $40
100 MW
Gen #3 $50
100 MW
Load A
Load B
80 MW
140 MW

1. Gen #1
2. Gen #2
3. Gen #3
4. Gen #4
Total Load
220 MW
West
Buffalo
Gen #1
100 MW
East
Albany
$25
??? MW
Gen #2 $30
100 MW
Gen #4 $40
100 MW
Gen #3 $50
100 MW
Load A
Load B
80 MW
140 MW
Total Load
220 MW
Gen #1
??? MW
Gen #1 is the most economic at $25/MWh.

Can Gen #1 provide its full capacity to
serve Load?
Yes
No
Total Load
220 MW
West
Buffalo
Gen #1
100 MW
East
Albany
$25
100 MW
Gen #2 $30
100 MW
Gen #4 $40
100 MW
Gen #3 $50
100 MW
Load A
Load B
80 MW
140 MW
Total Load
220 MW
Gen #1
100 MW
Remaining
Load
120 MW
Gen #1 is selected for 100 MW

Still need to select generation to meet
the remaining Load of 120MW.
Total Load
220 MW
West
Buffalo
Gen #1
100 MW
East
Albany
$25
100 MW
Gen #2 $30
100 MW
Gen #4 $40
100 MW
Gen #3 $50
100 MW
Load A
Load B
80 MW
140 MW
Total Load
220 MW
Gen #1
100 MW
Remaining
Load
120 MW
Select the next generator that is the most

economic (cheapest)
1. Gen #2
2. Gen #3
3. Gen #4
Total Load
220 MW
West
Buffalo
Gen #1
100 MW
$25
East
Albany
Gen #2
100 MW
$30
100 MW
??? MW
Gen #4 $40
100 MW
Gen #3 $50
100 MW
Load A
Load B
80 MW
140 MW
Total Load
220 MW
Gen #1
100 MW
Gen #2
??? MW

serve load?
Yes
No
Total Load
220 MW
West
Buffalo
Gen #1
100 MW
$25
East
Albany
Gen #2
100 MW
$30
100 MW
100 MW
Gen #4 $40
100 MW
Gen #3 $50
100 MW
Load A
Load B
80 MW
140 MW
Total Load
220 MW
Gen #1
100 MW
Gen #2
100 MW
Remaining
Load
20 MW

Still need to select generation to
meet the remaining Load of 20MW.
Total Load
220 MW
West
Buffalo
Gen #1
100 MW
$25
East
Albany
Gen #2
100 MW
$30
100 MW
100 MW
Gen #4 $40
100 MW
Gen #3 $50
100 MW
Load A
Load B
80 MW
140 MW
Total Load
220 MW
Gen #1
100 MW
Gen #2
100 MW
Remaining
Load
20 MW
Select the next generator that is

the most economic
1. Gen #3
2. Gen #4
Total Load
220 MW
West
Buffalo
Gen #1
100 MW
Gen #4
100 MW
Albany
Gen #2
100 MW
$25
100 MW
$40
??? MW
East
$30
100 MW
Gen #3 $50
100 MW
Load A
Load B
80 MW
140 MW
Total Load
220 MW
Gen #1
100 MW
Gen #2
100 MW
Gen #4
??? MW

serve load?
Yes
No
Total Load
220 MW
West
Buffalo
Gen #1
100 MW
Albany
Gen #2
100 MW
$25
$30
100 MW
100 MW
Gen #4
100 MW
East
Gen #3 $50
100 MW
$40
20 MW
Load A
Load B
80 MW
140 MW
Total Load
220 MW
Gen #1
100 MW
Gen #2
100 MW
Gen #4
20 MW
To meet the remaining load of

20 MW, Gen #4 is selected for
20 MW.
Total Load of 220 MW is met
West
Total Load
220 MW
Buffalo
Gen #1
100 MW
$25
Albany
Gen #2
100 MW
$30
100 MW
100 MW
Gen #4
100 MW
East
$40
20 MW
Gen #3 $50
100 MW
Load A
Load B
80 MW
140 MW
Based on the Generators/MWs selected, how many

MW will cross the Buffalo/Albany Line?
1. 40 MW
2. 60 MW
3. 100 MW
4. 90 MW
Total Load
220 MW
West
Buffalo
Gen #1
100 MW
East
Albany
Gen #2
100 MW
$25
100 MW
100 MW
Gen #4
100 MW
20 MW
40 MW
100 MW
20 MW
80 MW
80 MW
100 MW
Gen #3 $50
100 MW
$40
Load A
$30
140 MW
Load B
140 MW
100 MW (Gen #1) + 20 MW (Gen #4) - 80 MW (Load A) = 40 MW

40 MW will cross the Buffalo/Albany Line.
The Transmission Limit is not reached or exceeded.
Total Load
220 MW
West
Buffalo
Gen #1
100 MW
$25
Albany
Gen #2
100 MW
$30
100 MW
100 MW
Gen #4
100 MW
East
$40
20 MW
Gen #3 $50
100 MW
Load A
Load B
80 MW
140 MW
Total Load
220 MW
Gen #1
100 MW
Gen #2
100 MW
Gen #4
20 MW
What is the LBMP?

1. $25
2. $30
3. $35
4. $40
5. $45
6. $50
Total Load
220 MW
West
Buffalo
Gen #1
100 MW
$25
Albany
Gen #2
100 MW
$30
100 MW
100 MW
Gen #4
100 MW
East
$40
20 MW
Gen #3 $50
100 MW
Load A
Load B
80 MW
140 MW
LBMP (West) =
$40/MWh
LBMP (East) =
$40/MWh
Generator #4 can provide the next MW of Load at $40/MW

regardless if the load increases in the West or in the East.
Total Load
220 MW
West
Buffalo
Gen #1
100 MW
$25
Albany
Gen #2
100 MW
$30
100 MW
100 MW
Gen #4
100 MW
East
$40
20 MW
Gen #3 $50
100 MW
Load A
Load B
80 MW
140 MW
Total Load
220 MW
Gen #1
100 MW
Gen #2
100 MW
Gen #4
20 MW
Which generator is the Marginal Unit?

Gen #1
Gen #2
Gen #3
Gen #4
Total Load
220 MW
West
Buffalo
Gen #1
100 MW
$25
Albany
Gen #2
100 MW
$30
100 MW
100 MW
Gen #4
100 MW
East
$40
20 MW
Gen #3 $50
100 MW
Load A
Load B
80 MW
140 MW
Total Load
220 MW
Gen #1
100 MW
Gen #2
100 MW
Gen #4
20 MW
Gen #4 is the Marginal Unit.

The generator that would
serve the next MW of load.
Total Load
220 MW
West
Buffalo
Gen #1
100 MW
$25
Albany
Gen #2
100 MW
$30
100 MW
100 MW
Gen #4
100 MW
East
$40
20 MW
Gen #3 $50
100 MW
Load A
Load B
80 MW
140 MW
West + East =
80 MW + 140 MW =

Total Load = 220 MW

$30 for next 100 MW
$40 for next 20 MW
Determine the Cost of serving Generator #4 can

serve the next MW
220 MW
Generator #4
$40/MWh
Total Load
220 MW
West
Buffalo
Gen #1
100 MW
East
Albany
Gen #2
100 MW
$25
100 MW
100 MW
Gen #4
100 MW
20 MW
40 MW
100 MW
20 MW
80 MW
LBMP (West) =
$40/MWh
80 MW
100 MW
Gen #3 $50
100 MW
$40
Load A
$30
140 MW
Load B
140 MW
LBMP (East) =
$40/MWh
In this example 40 MW is transmitted over the Buffalo/Albany

Line. The Transmission Limit of 50 MW is not exceeded. When
Transmission Limits are not reached or exceeded the LBMP for
West and East are the same.
Congestion occurs when the Power flow

reaches the Transmission Limit.
NY Bulk Power System is:

Tightly Interconnected
Operationally Complex
Congestion .
A Characteristic of Transmission System
Occurs when the Transmission Limit is
reached
When Transmission Limits are reached Generators from a

different bus are dispatched to meet the load.
When there is congestion LBMPs can differ between buses.
Locational-Based
at a specific location in the grid
Lets address the Locational Based aspect of

LBMP and see when the LBMP at the buses
would be different.
Example 4
LBMP with Congestion
Assumptions:
West
East
Buffalo
Gen#1
100 MW
Albany
Gen#2
$25
100 MW
$45
Load A
Load B
10 MW
60 MW
1. 10 MW
2. 70 MW
3. 60 MW
4. 100 MW
Total Load
West
70 MW
Buffalo
Gen#1
100 MW
East
Albany
Gen#2
$25
100 MW
$45
Load A
Load B
10 MW
60 MW
Total Load is 70 MW
Total Load
West
70 MW
Buffalo
Gen#1
100 MW
$25
East
Albany
Gen#2
100 MW
$45
Load A
Load B
10 MW
60 MW

1. Gen #1
2. Gen #2
3. Load A
4. Load B
Total Load
West
70 MW
Buffalo
Gen#1
100 MW
$25
East
Albany
Gen#2
100 MW
$45
Load A
Load B
10 MW
60 MW

Total Load
West
Gen#1
100 MW
$25
70 MW
Buffalo
Albany
East
Gen#2
100 MW
$45
Load A
Load B
10 MW
60 MW
What is the transmission limit for the Buffalo/Albany Line?

1. 10 MW
2. 60 MW
3. 50 MW
4. 100 MW
Total Load
West
Gen#1
100 MW
$25
70 MW
Buffalo
Albany
East
Gen#2
100 MW
$45
Load A
Load B
10 MW
60 MW
The transmission limit for the Buffalo/Albany Line is 50 MW.
Total Load
West
Gen#1
100 MW
70 MW
Buffalo
Albany
Gen#2
$25
70 MW
East
100 MW
$45
?? MW
Load A
Load B
10 MW
60 MW
If Gen #1 is selected to serve 70 MW of Load how many MW will have

to cross the Buffalo/Albany Line?
1. 10 MW
2. 60 MW
3. 50 MW
4. 100 MW
Total Load
West
Gen#1
100 MW
70 MW
Buffalo
$25
70 MW
Albany
East
Gen#2
60 MW
100 MW
$45
70 MW
10 MW
Load A
Load B
10 MW
60 MW
If Gen #1 is selected for 70 MW,

Total Load
West
Gen#1
100 MW
70 MW
Buffalo
$25
70 MW
Albany
Limit
Exceeded
60 MW
East
Gen#2
100 MW
$45
70 MW
10 MW
Load A
Load B
10 MW
60 MW
60 MW exceeds the 50 MW Transmission Limit

across the Buffalo/Albany Line
Total Load
West
Gen#1
100 MW
$25
?? MW
70 MW
Buffalo
Albany
East
Gen#2
100 MW
$45
Load A
Load B
10 MW
60 MW
Without exceeding the Buffalo/Albany Transmission Line Limit,

Gen #1 is selected for:
1. 70 MW
2. 10 MW
3. 50 MW
4. 60 MW
Total Load
West
Gen#1
100 MW
70 MW
Buffalo
$25
60 MW
Albany
East
Gen#2
50 MW
100 MW
$45
60 MW
10 MW
Load A
Load B
10 MW
60 MW
Gen #1 provides 60 MW.

10 MW to meet Load A.
Total Load
West
Buffalo
Gen#1
100 MW
$25
60 MW
70 MW
Congestion
At Limit
50 MW
East
Albany
Gen#2
100 MW
$45
60 MW
10 MW
Load A
Load B
10 MW
60 MW
50 MW crosses the Buffalo/Albany Line.

50 MW is the Transmission Limit.
Congestion occurs when Power flow reaches
the Transmission Limit.
Total Load
West
70 MW
Albany
Buffalo
Gen#1
100 MW
Congestion
At Limit
$25
60 MW
East
50 MW
Gen#2
100 MW
$45
60 MW
10 MW
Load A
10 MW
50 MW
Load B
60 MW
Gen #1 provides 60 MW.

Still need to meet the remaining
Load of 10 MW in the East
Total Load
West
Buffalo
Gen#1
100 MW
$25
60 MW
60 MW
10 MW
Load A
10 MW
70 MW
Congestion
At Limit
50 MW
East
Albany
Gen#2
100 MW
$45
10 MW
10 MW
60 MW
Load B
60 MW
Gen #2 can serve the next 10 MW.

The Total Load of 70 MW is now met.
Total Load
West
70 MW
Buffalo
Gen#1
100 MW
60 MW
$25
East
Albany
Gen#2
100 MW
10 MW
$45
Load A
Load B
10 MW
60 MW
To determine the LBMP lets see which

generator would be selected if the Total Load
changed to 71MW .
Total Load
West
Buffalo
Gen#1
100 MW
$25
61 MW
61 MW
11 MW
Load A
11MW
71 MW
Congestion
At Limit
50 MW
East
Albany
Gen#2
100 MW
$45
10 MW
10 MW
60 MW
Load B
60 MW

Gen #1 will be selected to serve the next MW
of Load in the West at $25/MW
Total Load
West
Buffalo
Gen#1
100 MW
$25
60 MW
60 MW
10 MW
Load A
10 MW
71 MW
Congestion
At Limit
50 MW
East
Albany
Gen#2
100 MW
$45
11 MW
11 MW
61 MW
Load B
61 MW

Gen #2 will be selected to serve the next
MW of Load in the East at $45/MW
Total Load
West
Buffalo
Gen#1
100 MW
$25
60 MW
70 MW
East
Albany
Gen#2
100 MW
$45
10 MW
Load A
Load B
10 MW
60 MW
Congestion creates a Locational Based

Marginal Pricing resulting in different
LBMPs for the West and the East ...
Total Load
West
Buffalo
Gen#1
100 MW
$25
60 MW
70 MW
East
Albany
Gen#2
100 MW
$45
10 MW
Load A
Load B
10 MW
60 MW
LBMP (West) =
$25/MWh
LBMP (East) =
$45/MWh
Total Load
70 MW
West
Buffalo
Gen#1
100 MW
60 MW
East
Albany
Gen#2
100 MW
$25
10 MW
$45
Load A
Load B
10 MW
60 MW
LBMP (West) =
$25/MWh

LBMP (East) =
$45/MWh
West + East =
10 MW + 60 MW =
70 MW
Total Load = 70 MW
Meet Load without exceeding Transmission Limits
West
$25 for 60 MW
Gen #1
East
$45 for 10 MW
Gen #2

West
$25/MWh
East
$45/MWh
Example 5
Assumptions:
West
East
Buffalo
Albany
Gen #1 $25
100 MW
Gen #2
50 MW
$30
Gen #4 $40
100 MW
Gen #3 $50
100 MW
Load A
Load B
20 MW
250 MW

1. 200 MW
2. 270 MW
3. 200 MW
4. 220 MW
West
Total Load
270 MW
Buffalo
Gen #1 $25
100 MW
East
Albany
Gen #2
50 MW
$30
Gen #4 $40
100 MW
Gen #3 $50
100 MW
Load A
Load B
20 MW
250 MW

1. Gen #1
2. Gen #2
3. Gen #3
4. Gen #4
Total Load
270 MW
West
Buffalo
Gen #1
100 MW
$25
??? MW
East
Albany
Gen #2
50 MW
$30
Gen #4 $40
100 MW
Gen #3 $50
100 MW
Load A
Load B
20 MW
250 MW
Total Load
Gen #1
270 MW
?? MW

serve load?
Yes
No
Total Load
270 MW
West
Buffalo
Gen #1
100 MW
$25
100 MW
East
Albany
Gen #2
50 MW
$30
Gen #4 $40
100 MW
Gen #3 $50
100 MW
Load A
Load B
20 MW
250 MW
Total Load
270 MW
Gen #1
100 MW
Remaining
Load
170 MW

Still need to select generation to meet the
remaining load of 170 MW.
Total Load
270 MW
West
Buffalo
Gen #1
100 MW
$25
100 MW
East
Albany
Gen #2
50 MW
$30
Gen #4 $40
100 MW
Gen #3 $50
100 MW
Load A
Load B
20 MW
250 MW
Total Load
270 MW
Gen #1
100 MW
Remaining
Load
170 MW

economic (cheapest)
1. Gen #2
2. Gen #3
3. Gen #4
Total Load
270 MW
West
Buffalo
Gen #1
100 MW
$25
East
Albany
Gen #2
50 MW
$30
100 MW
??? MW
Gen #4 $40
100 MW
Gen #3 $50
100 MW
Load A
Load B
20 MW
250 MW
Total Load
270 MW
Gen #1
100 MW
Gen #2
??? MW

serve load?
Yes
No
Total Load
270 MW
West
Buffalo
Gen #1
100 MW
$25
100 MW
East
Albany
Gen #2
50 MW
$30
50 MW
Gen #4 $40
100 MW
Gen #3 $50
100 MW
Load A
Load B
20 MW
250 MW
Total Load
270 MW
Gen #1
100 MW
Gen #2
50 MW
Remaining
Load
120 MW

meet the remaining load of 120 MW.
West
Total Load
270 MW
Buffalo
Gen #1
100 MW
$25
100 MW
East
Albany
Gen #2
50 MW
$30
50 MW
Gen #4 $40
100 MW
Gen #3 $50
100 MW
Load A
Load B
20 MW
250 MW
Total Load
270 MW
Gen #1
100 MW
Gen #2
50 MW
Remaining
Load
120 MW
Select the next generator that is

the most economic
1. Gen #3
2. Gen #4
West
Total Load
270 MW
Buffalo
Gen #1
100 MW
$25
100 MW
East
Albany
Gen #2
50 MW
$30
50 MW
Gen #4 $40
100 MW
Gen #3 $50
100 MW
Load A
Load B
20 MW
250 MW
Total
Load
270 MW
Gen #1
100 MW
Gen #2
50 MW
Gen #4
?? MW
Before we determine the amount of

MW of load Gen #4 can serve, lets take
a look at the:
Flow of MW
Impact of the Transmission Limit.
Total Load
270 MW
West
Buffalo
Gen #1
100 MW
$25
100 MW
Gen #4
100 MW
100 MW
$40
100 MW
20 MW
Albany
Gen #2
50 MW
?? MW
100 MW
Load A
East
20 MW
50 MW
$30
50 MW
Gen #3 $50
100 MW
Load B
250 MW

1. 100 MW
2. 200 MW
3. 180 MW
4. 50 MW
Total Load
270 MW
West
Buffalo
Gen #1
100 MW
$25
100 MW
Gen #4
100 MW
East
Albany
Gen #2
50 MW
180 MW
50 MW
100 MW
100 MW
100 MW
20 MW
50 MW
Gen #3 $50
100 MW
$40
Load A
$30
20 MW
20 MW
Limit
Exceeded
Load B
250 MW
100 MW (Gen #1) + 100 MW (Gen #2) 20 MW (Load A) = 180 MW

If Gen #4 were selected for 100 MW,
180 MW would have to cross the Buffalo/Albany Line.
This would exceed the 150 MW Transmission Line Limit.
Total Load
270 MW
West
Buffalo
Gen #1
100 MW
Gen #4
100 MW
100 MW
??? MW
$40
?? MW
Load A
20 MW
Albany
Gen #2
50 MW
$25
100 MW
East
20 MW
$30
50 MW
Gen #3 $50
100 MW
Load B
250 MW
How many MWs can Gen #4 provide without exceeding the

Buffalo/Albany Transmission Line Limit?
1. 100 MW
2. 50 MW
3. 70 MW
4. 0 MW
Total Load
240 MW
West
Buffalo
Gen #1
100 MW
Albany
Gen #2
50 MW
$25
100 MW
Gen #4
100 MW
East
100 MW
150 MW
50 MW
70 MW
70 MW
20 MW
50 MW
Gen #3 $50
100 MW
$40
Load A
$30
200 MW
20 MW
Load B
250 MW
100 MW (Gen #1) + 70 MW (Gen #2) 20 MW (Load A) = 150 MW

Total Load
240 MW
West
Buffalo
Gen #1
100 MW
$25
100 MW
100 MW
70 MW
#4
Gen
100 MW
East
Albany
Congestion
At
150Limit
MW
Gen #2
50 MW
50 MW
Gen #3 $50
100 MW
70 MW
20 MW
20 MW
50 MW
150 MW
$40
Load A
$30
200 MW
Load B
250 MW
Congestion occurs when Transmission Constraints are Reached
Total Load
270 MW
West
Buffalo
Gen #1
100 MW
$25
100 MW
Gen #4
100 MW
$40
70 MW
East
Albany
Congestion
At Limit
Gen #2
50 MW
$30
50 MW
Gen #3 $50
100 MW
Load A
Load B
20 MW
250 MW
Total Load
270 MW
Gen #1
100 MW
Gen #2
50 MW
Gen #4
70 MW
Remaining
Load
50 MW
Still need to meet the

remaining load of 50 MW .
Total Load
270 MW
West
Buffalo
Gen #1
100 MW
$25
East
Albany
Gen #2
50 MW
100 MW
50 MW
Gen #4
100 MW
Gen #3
100 MW
$40
70 MW
$30
$50
??? MW
Load A
Load B
20 MW
250 MW
Total Load
270 MW
Gen #1
100 MW
Gen #2
50 MW
Gen #4
70 MW
Remaining
Load
50 MW
How many MWs will Gen #3 have to

provide to meet the remaining load?
1. 100 MW
2. 50 MW
3. 80 MW
4. 70 MW
Total Load
270 MW
West
Buffalo
Gen #1
100 MW
$25
East
Albany
Gen #2
50 MW
100 MW
50 MW
Gen #4
100 MW
Gen #3
100 MW
$40
70 MW
$30
$50
50 MW
Load A
Load B
20 MW
250 MW
Total Load
270 MW
Gen #1
100 MW
Gen #2
50 MW
Gen #4
70 MW
Gen #3
50 MW
Gen #3 will have to provide 50 MW to

serve the remaining load.
Total Load
270 MW
West
Buffalo
Gen #1
100 MW
Albany
Gen #2
50 MW
$25
150 MW
100 MW
Gen #4
100 MW
East
100 MW
50 MW
50 MW
70 MW
50 MW
$40
20 MW
Gen #3
100 MW
$50
50 MW
70 MW
Load A
$30
250 MW
20 MW
Congestion
At Limit
Load B
250 MW
Total Load is met.

There is Congestion across the Buffalo/Albany Line.
West
Total Load
270 MW
Buffalo
Gen #1
100 MW
$25
East
Albany
Gen #2
50 MW
100 MW
50 MW
Gen #4
100 MW
Gen #3
100 MW
$40
70 MW
$30
$50
50 MW
Load A
Load B
20 MW
250 MW

changed to 271MW .
West
Total Load
271 MW
Buffalo
Gen #1
100 MW
East
Albany
Gen #2
50 MW
$25
100 MW
50 MW
Gen #4
100 MW
Gen #3
100 MW
$40
70 MW
$30
$50
50 MW
Load A
Load B
21 MW
250 MW
If Load A (West) increases by one MW .
West
Total Load
271 MW
Buffalo
Gen #1
100 MW
East
Albany
$25
Gen #2
50 MW
100 MW
50 MW
Gen #4
100 MW
Gen #3
100 MW
$40
70 MW
$30
$50
50 MW
Load A
Load B
21 MW
250 MW
Gen #4 still has capacity to serve 30 MW
Total Load
271 MW
West
Buffalo
Gen #1
100 MW
Albany
Gen #2
50 MW
$25
150 MW
100 MW
Gen #4
100 MW
East
100 MW
71 MW
$40
50 MW
50 MW
50 MW
Gen #3
100 MW
$50
50 MW
71 MW
Load A
$30
21 MW
250 MW
21 MW
If Load A (West) increases by one MW

Gen #4 provides the additional MW
Gen #4 provides a total of 71 MW
without exceeding the Transmission Limit
Load B
250 MW
Total Load
271 MW
West
Buffalo
Gen #1
100 MW
Albany
Gen #2
50 MW
$25
150 MW
100 MW
Gen #4
100 MW
East
100 MW
71 MW
$40
50 MW
50 MW
50 MW
21 MW
Gen #3
100 MW
$50
50 MW
71 MW
Load A
$30
21 MW
250 MW
Load B
250 MW
Gen #4 can serve the next MW of load in the West at .

1. $25/MWh
2. $30/MWh
3. $40/MWh
4. $50/MWh
Total Load
270 MW
West
Buffalo
Gen #1
100 MW
Albany
Gen #2
50 MW
$25
150 MW
100 MW
Gen #4
100 MW
East
100 MW
70 MW
$40
50 MW
50 MW
50 MW
20 MW
Gen #3
100 MW
$50
50 MW
70 MW
Load A
$30
20 MW
250 MW
Load B
250 MW
Gen #4 can serve the next MW of load in the West at $40/MWh
The LBMP for the WEST is $40/MWh
West
Total Load
271 MW
Buffalo
Gen #1
100 MW
East
Albany
Gen #2
50 MW
$25
100 MW
50 MW
Gen #4
100 MW
Gen #3
100 MW
$40
70 MW
$30
$50
50 MW
Load A
Load B
20 MW
251 MW
If Load B (East) increases by one MW .
Total Load
271 MW
West
Buffalo
Gen #1
100 MW
Albany
Gen #2
50 MW
$25
100 MW
Gen #4
100 MW
East
100 MW
50 MW
150 MW
50 MW
70 MW
51 MW
$40
20 MW
Gen #3
100 MW
$50
51 MW
70 MW
Load A
$30
20 MW
Congestion
At Limit
251 MW
Load B
251 MW
The system is at Transmission Constraints - Congestion

Transmission Limits cannot be exceeded. Gen #4 cannot serve the
next MW of load in the East without exceeding the Transmission Limit.
Gen #3 will have to serve the next MW of load in the East.
Total Load
271 MW
West
Buffalo
Gen #1
100 MW
Albany
Gen #2
50 MW
$25
150 MW
100 MW
Gen #4
100 MW
East
100 MW
70 MW
50 MW
50 MW
51 MW Gen #3
100 MW
$40
20 MW
$50
51 MW
70 MW
Load A
$30
20 MW
251 MW
Load B
251 MW
Gen #3 can serve the next MW of load in the East at .

1. $25/MWh
2. $30/MWh
3. $40/MWh
4. $50/MWh
Total Load
270 MW
West
Buffalo
Gen #1
100 MW
Albany
Gen #2
50 MW
$25
150 MW
100 MW
Gen #4
100 MW
East
100 MW
70 MW
$40
50 MW
50 MW
50 MW
20 MW
Gen #3
100 MW
$50
50 MW
70 MW
Load A
$30
20 MW
250 MW
Load B
250 MW
Gen #3 can serve the next MW of load in the East at $50/MWh
The LBMP for the East is $50/MWh
Total Load
270 MW
West
Buffalo
Gen #1
100 MW
$25
100 MW
Gen #4
100 MW
$40
70 MW
East
Albany
Congestion
At Limit
Gen #2
50 MW
$30
50 MW
Gen #3
100 MW
$50
50 MW
Load A
Load B
20 MW
250 MW
LBMP (West) =
$40/MWh
LBMP (East) =
$50/MWh
When transmission limits are reached there

is congestion, resulting in unequal LBMPs in
the West and East.
Total Load
270 MW
West
Buffalo
Gen #1
100 MW
$25
100 MW
Gen #4
100 MW
$40
70 MW
Albany
Congestion
At Limit
Gen #2
50 MW
$30
50 MW
Gen #3
100 MW
$50
50 MW
Load A
Load B
20 MW
250 MW
LBMP (West) =
$40/MWh
East
LBMP (East) =
$50/MWh
The Cost of Congestion is the difference

between the West & East LBMPs
Congestion for this example is equal to
[$50/MWh-$40/MWh=$10/MWh]
West
Total Load
270 MW
Buffalo
Gen #1
100 MW
$25
East
Albany
Gen #2
50 MW
100 MW
50 MW
Gen #4
100 MW
Gen #3
100 MW
$40
$30
$50
50 MW
70 MW
Load A
Load B
20 MW
250 MW
Total Load
270 MW
Gen #1
100 MW
Gen #2
50 MW
Gen #4
70 MW
Gen #3
50 MW
Which generator is the Marginal Unit in

the West?
Gen #1
Gen #2
Gen #3
Gen #4
West
Total Load
270 MW
Buffalo
Gen #1
100 MW
$25
East
Albany
Gen #2
50 MW
100 MW
50 MW
Gen #4
100 MW
Gen #3
100 MW
$40
$30
$50
50 MW
70 MW
Load A
Load B
20 MW
250 MW
Total Load
270 MW
Gen #1
100 MW
Gen #2
50 MW
Gen #4
70 MW
Gen #3
50 MW
Which generator is the Marginal Unit in

the East?
Gen #1
Gen #2
Gen #3
Gen #4
Total Load
270 MW
West
Buffalo
Gen #1
100 MW
East
Albany
Gen #2
50 MW
$25
100 MW
50 MW
Gen #4
100 MW
Gen #3
100 MW
$40
$30
$50
50 MW
70 MW
Load A
Load B
20 MW
250 MW
West + East =
20 MW + 250 MW =

Total Load = 270 MW

$30 for next 50 MW
270 MW
Meet Load without
exceeding
Transmission
Limits ..
West
$40 for next 70 MW
Gen #4
East
$50 for next 50 MW
Gen #3

West
$40/MWh
East
$50/MWh
Example 6
Assumptions:
West
East
Buffalo
Gen #1
100MW
Albany
$55
Gen #4
$75
100 MW
Gen #2
$50
100 MW
Gen #5
50 MW
$45
Gen #3
$40
100 MW
Gen #6
50 MW
$60
Load A
40 MW
Load B
270 MW

1. 230 MW
2. 310 MW
3. 150 MW
4. 320 MW
West
Total Load
310 MW
Buffalo
Gen #1
100MW
$55
East
Albany
Gen #4
100 MW $75
Gen #2
100 MW $50
Gen #5
50 MW
$45
Gen #3
100 MW $40
Gen #6
50 MW
$60
Load A
40 MW
Load B
270 MW

Gen #1
Gen #2
Gen #3
Gen #4
Gen #5
Gen #6
Total Load
310 MW
West
Buffalo
Gen #1
100MW
$55
Gen #2
$50
100 MW
Gen #3
100 MW
?? MW
$40
Load A
40 MW
150 MW
50 MW
100 MW
40 MW
East
Albany
Gen #4
$75
100 MW
Gen #5
50 MW
$45
Gen #6
50 MW
$60
Load B
270 MW
Total Load
310 MW
West
Buffalo
Gen #1
100MW
$55
Gen #2
100 MW $50
Gen #3
100 MW
100 MW
$40
Load A
40 MW
East
Albany
Gen #4
100 MW $75
Gen #5
50 MW
$45
Gen #6
50 MW
$60
Load B
270 MW
Total Load
310 MW
Gen #3
100 MW
Remaining
Load
210 MW

Still need to select generation to meet
the remaining load of 210 MW.
Total Load
310 MW
West
Buffalo
Gen #1
100MW
$55
Gen #2
100 MW $50
Gen #3
100 MW
$40
100 MW
Load A
40 MW
Total Load
310 MW
Gen #3
100 MW
Remaining
Load
210 MW
East
Albany
Gen #4
100 MW $75
Gen #5
50 MW
$45
Gen #6
50 MW
$60
Load B
270 MW
economic (cheapest)
Gen #1
Gen #2
Gen #4
Gen #5
Gen #6
Total Load
310 MW
West
Buffalo
Gen #1
100MW
$55
Gen #2
100 MW $50
Gen #3
100 MW
$40
100 MW
Load A
40 MW
1. 150 MW
2. 50 MW
3. 100 MW
4. 40 MW
East
Albany
Gen #4
100 MW $75
Gen #5
50 MW
$45
?? MW
Gen #6
50 MW
$60
Load B
270 MW
West
Total Load
310 MW
Buffalo
Gen #1
100MW
$55
Gen #2
100 MW $50
#3
Gen
100 MW
$40
100 MW
Load A
40 MW
Total Load
310 MW
Gen #3
100 MW
Gen #5
50 MW
Remaining
Load
160 MW
East
Albany
Gen #4
100 MW $75
Gen #5
50 MW
$45
50 MW
Gen #6
50 MW
$60
Load B
270 MW
meet the remaining load of 160 MW.
Total Load
310 MW
West
Buffalo
Gen #1
100MW
$55
Gen #2
100 MW $50
Gen #3
100 MW
100 MW
$40
Load A
40 MW
Albany
Gen #4
100 MW $75
Gen #5
50 MW
50 MW
Gen #6
50 MW
$45
$60
Load B
270 MW
Total Load
310 MW
Gen #3
100 MW
Gen #5
50 MW
Remaining
Load
East
160 MW

economic (cheapest)
Gen #1
Gen #2
Gen #4
Gen #6
West
Total Load
310 MW
Buffalo
Gen #1
100MW
Gen #2
100 MW
100 MW
Gen #3
100 MW
100 MW
$55
$50
East
Albany
Gen #4
100 MW $75
Gen #5
50 MW
50 MW
$40
Load A
40 MW
Gen #6
50 MW
$45
$60
Load B
270 MW
Lets see what happens if Gen #2

is selected for 100 MW..
Total Load
310 MW
West
Buffalo
Gen #1
100MW
Gen #2
100 MW
100 MW
Gen #3
100 MW
100 MW
East
Albany
Gen #4
100 MW $75
$55
100MW
Gen #5
50 MW
$50
100MW
Gen #6
50 MW
$40
Load A
40 MW
50 MW
$45
$60
40MW
Load B
270 MW

1. 200 MW
2. 160 MW
3. 150 MW
4. 140 MW
Total Load
310 MW
West
Buffalo
Gen #1
100MW
Gen #2
100 MW
100 MW
Gen #3
100 MW
100 MW
Albany
Limit
Exceeded
$55
East
Gen #4
100 MW $75
100MW
160 MW
$50
100MW
50 MW
Gen #6
50 MW
$40
Load A
40 MW
Gen #5
50 MW
$45
$60
40MW
Load B
270 MW
If Gen #2 is selected for 100 MW ... 200 MW are provided by

Generators in the West. Subtracting the West Load of 40 MW
from the 200 MW generated leaves 160 MW to cross the
Buffalo/Albany Line.
This will exceed the transmission limit of 150 MW.
West
Total Load
310 MW
Buffalo
Gen #1
100MW
Gen #2
100 MW
??? MW
Gen #3
100 MW
100 MW
$55
$50
East
Albany
Gen #4
100 MW $75
Gen #5
50 MW
50 MW
$40
Load A
40 MW
Gen #6
50 MW
$45
$60
Load B
270 MW
Without exceeding the Buffalo/Albany Transmission Line Limit,

1. 70 MW
2. 50 MW
3. 90 MW
4. 150 MW
Total Load
310 MW
West
Buffalo
Gen #1
100MW
Gen #2
100 MW
90 MW
Gen #3
100 MW
90MW
$50
100MW
150MW
Gen #4
100 MW $75
Gen #5
50 MW
$45
50 MW
Gen #6
50 MW
$40
100 MW
Albany
Congestion
At Limit
$55
East
$60
40MW
Load A
40 MW
Load B
270 MW
Total Load
310 MW
Gen #3
100 MW
Gen #5
50 MW
Gen #2
90 MW
Remaining Load
70 MW
Gen #2 is selected for 90 MW. 190

MW is generated in the West.
Subtracting the West Load of 40
MW leaves 150 MW to cross the
West
Total Load
310 MW
Buffalo
Gen #1
100MW
Gen #2
100 MW
90 MW
Albany
Gen #4
100 MW $75
$55
Gen #5
50 MW
$50
$45
50 MW
#3
Gen
100 MW
East
Gen #6
50 MW
$40
100 MW
Load A
40 MW
$60
Load B
270 MW
Total Load
310 MW
Gen #3
100 MW
Gen #5
50 MW
Gen #2
90 MW
Remaining Load
70 MW
Can Generation from the West

continue to be selected to meet the
remaining load in the East?
Yes
No
Total Load
310 MW
West
Buffalo
Gen #1
100MW
Gen #2
100 MW
90MW
$50
90 MW
Gen #3
100 MW
100MW
150MW
Gen #4
100 MW $75
Gen #5
50 MW
$45
50 MW
Gen #6
50 MW
$40
100 MW
Albany
Congestion
At Limit
$55
East
$60
40MW
Load A
40 MW
Load B
270 MW
Total Load
310 MW
Gen #3
100 MW
Gen #5
50 MW
Gen #2
90 MW
Remaining Load
70 MW
Any further generation from the West

would increase the MW crossing the
Buffalo/Albany Line. Generation from
the West cannot be selected to meet
the remaining load in the East since
the Buffalo-Albany Transmission Line
is at the Limit.
Total Load
310 MW
West
Buffalo
Gen #1
100MW
Gen #2
100 MW
90 MW
Gen #3
100 MW
East
Albany
Gen #4
100 MW $75
$55
90MW
150MW
Gen #5
50 MW
$50
100MW
50MW
100 MW
50 MW
Gen #6
50 MW
$40
40MW
Load A
40 MW
$45
$60
200MW
Load B
270 MW
Total Load
310 MW
Gen #3
100 MW
Gen #5
50 MW
Gen #2
90 MW
Remaining Load
70 MW

meet the remaining load of 70 MW
in the East .
West
Total Load
310 MW
Buffalo
Gen #1
100MW
Albany
$55
150MW
Gen #2
100 MW
Gen #4
100 MW $75
Gen #5
50 MW
$50
90 MW
Gen #3
100 MW
East
$45
50 MW
Gen #6
50 MW
$40
100 MW
Load A
40 MW
$60
Load B
270 MW
Total Load
310 MW
Gen #3
100 MW
Gen #5
50 MW
Gen #2
90 MW
Remaining Load
70 MW
Select the next generator that is the

most economic (cheapest) without
exceeding the transmission limits:
Gen #1
Gen #4
Gen #5
Gen #6
West
Total Load
310 MW
Buffalo
Gen #1
100MW
Albany
$55
150MW
Gen #2
100 MW
Gen #4
100 MW $75
Gen #5
50 MW
$50
90 MW
Gen #3
100 MW
East
$45
50 MW
Gen #6
50 MW
$40
100 MW
?? MW
Load A
40 MW
$60
Load B
270 MW
Total Load
310 MW
Gen #3
100 MW
Gen #5
50 MW
Gen #2
90 MW
Gen #6
?? MW
Remaining Load
70 MW

70 MW
50 MW
30 MW
40 MW
Total Load
310 MW
West
Buffalo
Gen #1
100MW
Albany
$55
150MW
Gen #2
100 MW
$50
$45
50 MW
Gen #6
50 MW
$40
100 MW
50 MW
Load A
40 MW
Total Load
Gen #4
100 MW $75
Gen #5
50 MW
90 MW
Gen #3
100 MW
East
$60
Load B
270 MW
310 MW
Gen #3
100 MW
Gen #5
50 MW
Gen #2
90 MW
Gen #6
50 MW
Remaining Load
20 MW
Gen #6 is selected for 50 MW.

Still need to select generation
to meet the remaining load of
20 MW in the East.
Total Load
310 MW
West
Buffalo
Gen #1
100MW
Albany
Gen #4
100 MW
$55
150MW
Gen #2
100 MW
$50
$75
$45
50 MW
Gen #6
50 MW
$40
100 MW
50 MW
Load A
40 MW
Total Load
20 MW
Gen #5
50 MW
90 MW
Gen #3
100 MW
East
$60
Load B
270 MW
310 MW
Gen #3
100 MW
Gen #5
50 MW
Gen #2
90 MW
Gen #6
50 MW
Remaining Load
20 MW
Gen #4 can serve the

remaining load of 20 MW.
Total load is met.
Total Load
310 MW
West
Buffalo
Gen #1
100MW
Albany
Gen #4
100 MW
$55
?? MW
Gen #2
100 MW
$50
$75
$45
50 MW
Gen #6
50 MW
$40
100 MW
50 MW
Load A
40 MW
Total Load
20 MW
Gen #5
50 MW
90 MW
Gen #3
100 MW
East
310 MW
Gen #3
100 MW
Gen #5
50 MW
Gen #2
90 MW
Gen #6
50 MW
Gen #4
20 MW
$60
Load B
270 MW
Based on the Generators and MWs
selected, how many MWs will cross
the Buffalo/Albany Line?
1. 100 MW
2. 150 MW
3. 180 MW
4. 160 MW
Total Load
310 MW
West
Buffalo
Gen #1
100MW
Gen #2
100 MW
East
Albany
Gen #4
100 MW
$55
90MW
150MW
20 MW
20MW
$50
90 MW
Gen #3
100 MW
100MW
$40
100 MW
Load A
40 MW
Total Load
50MW
40MW
50MW
270MW
Gen #5
50 MW
100 MW
Gen #5
50 MW
Gen #2
90 MW
Gen #6
50 MW
Gen #4
20 MW
$45
50 MW
Gen #6
50 MW
50 MW
$60
Load B
270 MW
310 MW
Gen #3
$75
150 MW will cross the

Transmission Limit is not
exceeded.
West
Total Load
310 MW
Buffalo
Gen #1
100MW
Gen #2
100 MW
$55
Albany
Gen #4
100 MW
20 MW
$50
90 MW
Gen #3
100 MW
East
Gen #5
50 MW
$75
$45
50 MW
$40
100 MW
Load A
40 MW
Gen #6
50 MW
$60
50 MW
Load B
270 MW

changed to 311MW .
West
Total Load
311 MW
Buffalo
Gen #1
100MW
Gen #2
100 MW
$55
Albany
Gen #4
100 MW
$75
20 MW
$50
90 MW
Gen #3
100 MW
East
Gen #5
50 MW
$45
50 MW
$40
100 MW
Gen #6
50 MW
50 MW
Load A
41 MW
If Load in the West increases by one MW .
$60
Load B
270 MW
West
Total Load
311 MW
Buffalo
Gen #1
100MW
Gen #2
100 MW
$55
Albany
Gen #4
100 MW
$75
20 MW
$50
90 MW
Gen #3
100 MW
East
Gen #5
50 MW
$45
50 MW
$40
100 MW
Load A
41 MW
Gen #6
50 MW
$60
50 MW
Load B
270 MW
Which generator (most economic) can serve the next MW

of Load in the West, without exceeding transmission
limits?
Gen #1
Gen #2
Gen #3
Gen #4
Gen #5
Gen #6
Total Load
311 MW
West
Buffalo
Gen #1
100MW
Gen #2
100 MW
91 MW
Gen #3
100 MW
East
Albany
Gen #4
100 MW
$55
91MW
150MW
20 MW
20MW
$50
100MW
50MW
$40
100 MW
Load A
41 MW
41MW
50MW
270MW
$75
Gen #5
50 MW
$45
50 MW
Gen #6
50 MW
50 MW
$60
Load B
270 MW
If Load in the West increases by one MW

Gen #2 can serve the next MW of load in the West without
exceeding the Transmission Limit
Total Load
311 MW
West
Buffalo
Gen #1
100MW
Gen #2
100 MW
East
Albany
Gen #4
100 MW
$55
91MW
150MW
20 MW
20MW
$50
91 MW
Gen #3
100 MW
100MW
50MW
$40
100 MW
Load A
41 MW
41MW
$75
50MW
270MW
Gen #5
50 MW
$45
50 MW
Gen #6
50 MW
$60
50 MW
Load B
270 MW
Gen #2 can serve the next MW of load in the West at .

1. $25/MWh
2. $30/MWh
3. $40/MWh
4. $50/MWh
Total Load
310 MW
West
Buffalo
Gen #1
100MW
Gen #2
100 MW
East
Albany
Gen #4
100 MW
$55
90MW
150MW
20 MW
20MW
$50
90 MW
Gen #3
100 MW
100MW
50MW
$40
100 MW
Load A
40 MW
41MW
$75
50MW
270MW
Gen #5
50 MW
$45
50 MW
Gen #6
50 MW
$60
50 MW
Load B
270 MW
Gen #2 can serve the next MW of load in the West at $50/MWh
The LBMP for the WEST is $50/MWh
West
Total Load
311 MW
Buffalo
Gen #1
100MW
Gen #2
100 MW
90 MW
Gen #3
100 MW
$55
East
Albany
Gen #4
100 MW
20 MW
$50
Gen #5
50 MW
$75
$45
50 MW
$40
100 MW
Gen #6
50 MW
50 MW
Load A
40 MW
If Load in the East increases by one MW .
$60
Load B
271 MW
West
Total Load
311 MW
Buffalo
Gen #1
100MW
Gen #2
100 MW
90 MW
$55
East
Albany
Gen #4
100 MW
20 MW
$50
$45
50 MW
#3
Gen
100 MW
Gen #5
50 MW
$75
$40
100 MW
Load A
40 MW
Which generator (most economic) can provide the
additional MW of Load in the East?
East
Gen #1
Gen #2
Gen #3
Gen #4
Gen #5
Gen #6
Gen #6
50 MW
50 MW
$60
Load B
271 MW
Total Load
311MW
West
Buffalo
Gen #1
100MW
Gen #2
100 MW
90 MW
Gen #3
100 MW
East
Albany
Gen #4
100 MW
$55
90MW
150MW
21 MW
21MW
$50
100MW
50MW
$40
100 MW
Load A
40 MW
40MW
50MW
271MW
Gen #5
50 MW
$75
$45
50 MW
Gen #6
50 MW
50 MW
$60
Load B
271 MW
If Load in the East increases by one MW

Gen #4 can serve the next MW of load in the East without
exceeding the Transmission Limit
Total Load
311 MW
West
Buffalo
Gen #1
100MW
Gen #2
100 MW
90 MW
Gen #3
100 MW
East
Albany
Gen #4
100 MW
$55
90 MW
150MW
21 MW
21MW
$50
100MW
50 MW
$40
100 MW
Load A
40 MW
40MW
50MW
271MW
Gen #5
50 MW
$75
$45
50 MW
Gen #6
50 MW
50 MW
$60
Load B
271 MW
Gen #4 can serve the next MW of load in the East at

1. $75/MWh
2. $45/MWh
3. $50/MWh
4. $60/MWh
Total Load
310MW
West
Buffalo
Gen #1
100MW
Gen #2
100 MW
90 MW
Gen #3
100 MW
East
Albany
Gen #4
100 MW
$55
90 MW
150MW
20 MW
20 MW
$50
100MW
50 MW
$40
100 MW
Load A
40 MW
40MW
50MW
271MW
Gen #5
50 MW
$75
$45
50 MW
Gen #6
50 MW
50 MW
$60
Load B
270 MW
Gen #4 can serve the next MW of load in the East at $75/MWh
The LBMP for the EAST is $75/MWh
Total Load
310 MW
West
Buffalo
Gen #1
100MW
Gen #2
100 MW
$55
100 MW
Albany
Gen #4
100 MW
20 MW
$50
90 MW
Gen #3
100 MW
East
Gen #5
50 MW
$75
$45
50 MW
$40
Load A
40 MW
LBMP (West) =
$50/MWh
Gen #6
50 MW
50 MW
$60
Load B
270 MW
LBMP (East) =
$75/MWh
Total Load
310 MW
West
Buffalo
Gen #1
100MW
Gen #2
100 MW
$55
$50
Gen #4
100 MW
Gen #5
50 MW
$75
$45
50 MW
#3
100 MW
Albany
20 MW
90 MW
Gen
100 MW
East
$40
Load A
40 MW
LBMP (West) =
$50/MWh
Gen #6
50 MW
50 MW
$60
Load B
270 MW
LBMP (East) =
$75/MWh
Ignoring losses what is the cost of Congestion?

1. $50/MWh
2. $40/MWh
3. $25/MWh
4. $75/MWh
Total Load
310 MW
West
Buffalo
Gen #1
100MW
Gen #2
100 MW
$55
$50
Gen #4
100 MW
Gen #5
50 MW
$75
$45
50 MW
#3
100 MW
Albany
20 MW
90 MW
Gen
100 MW
East
$40
Load A
40 MW
LBMP (West) =
$50/MWh
Gen #6
50 MW
50 MW
$60
Load B
270 MW
LBMP (East) =
$75/MWh
Ignoring losses, the cost of Congestion is

the difference between the LBMPs
[$75/MWh - $50/MWh = $25/MWh]

$25/MWh is the Cost of Congestion
West
Total Load
310 MW
Buffalo
Gen #1
100MW
Gen #2
100 MW
$55
Albany
Gen #4
100 MW
$75
20 MW
$50
90 MW
Gen #3
100 MW
East
Gen #5
50 MW
$45
50 MW
$40
100 MW
Load A
40 MW
Gen #6
50 MW
$60
50 MW
Load B
270 MW
Which generator is the Marginal Unit for the West?

West
Gen #1
Gen #2
Gen #3
Gen #4
Gen #5
Gen #6
West
Total Load
310 MW
Buffalo
Gen #1
100MW
Gen #2
100 MW
90 MW
$55
100 MW
Albany
Gen #4
100 MW
20 MW
$50
Gen #5
50 MW
$75
$45
50 MW
#3
Gen
100 MW
East
$40
Load A
40 MW
Gen #6
50 MW
50 MW
$60
Load B
270 MW
Which generator is the Marginal Unit for the East?

East
Gen #1
Gen #2
Gen #3
Gen #4
Gen #5
Gen #6
Total Load
310 MW
West
Buffalo
Gen #1
100MW
Gen #2
100 MW
Albany
Gen #4
100 MW
$55
20 MW
Gen #5
50 MW
$50
90 MW
Gen #3
100 MW
100 MW
East
$75
$45
50 MW
Gen #6
50 MW
$40
50 MW
Load A
40 MW
$60
Load B
270 MW
West + East =
40 MW + 270 MW =

Total Load = 310 MW

$45 for next 50 MW
West
East
Determine the Cost of serving the
Next MW of Load.
310 MW
Meet Load without
exceeding
Transmission
Limits ..
$50 for next 90 MW
Gen #2
$60 for next 50 MW
Gen #6
$75 for next 20 MW
Gen #4
West
$50/MWh
East
$75/MWh
Recognize:
To maintain an efficient and reliable
Transmission System a departure from
economic dispatch may be necessary to
ensure Transmission Limits are not
exceeded.
Congestion occurs when the transmission
limit is reached
Congestion results in unequal LBMPs at
different locations.
The previous examples show how the LBMP consists of

the cost of Energy as well as Congestion when
Transmission Limits are reached.
LBMP consists of three components .
(1) Energy
LBMP
Locational
Based
Marginal
Pricing
(2) Congestion
(3) Losses
(1) Energy:
Selecting the generation that is the most
economic (cheapest) to meet the Load
1.
The price of producing an additional MW of Load is called the

marginal price.
price
2.
The Energy component of LBMP is called marginal cost of

energy.
3.
The Energy component is the same for all buses.
4.
LBMP will be the same when:
5.
Transmission Limits are not reached

Losses are zero
Energy costs are usually positive.
(2) Congestion:
Ensuring transmission limits are not exceeded.
1.
Generation schedules may cause one or more

transmission lines, or other transmission equipment, to
carry more power than their rating allows.
2.
To maintain an efficient and reliable Transmission System

a departure from economic dispatch may be necessary to
ensure Transmission Limits are not exceeded.
3.
Congestion results in unequal LBMPs at different

locations.
4.
Congestion is one of the components of LBMP called the

marginal cost of congestion.
5.
The congestion component is zero when:
6.
Transmission Limits are not reached

Congestion can be zero, negative or positive.
(3) Losses:
Accounting for the Generation lost.
Transmission losses are one of the

components of LBMP called the marginal
cost of losses
Transmission losses is the power lost as
dissipated heat when power flows in
transmission lines and transformers.
Losses can be zero, negative or positive.
(3) Losses:
Accounting for the Generation lost.
Example determining the marginal cost of losses:

losses
Need 100 MW to be delivered
There is a 2% Loss of Generation or 2 MW
To deliver 100 MW need 102 MW Total
Generation to account for losses
102 MW
Generated
2 MW Lost
At $20/MW
Losses: (2 MW) x ($20/MW) = $40

Cost of losses is ($40)/100 MW = $0.40/MW
See Day Ahead Scheduling Manual, Attachment A
100 MW
delivered.
Generators are Paid the LBMP

(where they inject power) at the
Generator Bus.
The New York

Control Area
(NYCA) has over
400 Generator
Buses.
Load is charged based

on the Zone where the
Load is located
Zonal LBMP is a
Load Weighted
Average for the
Zone.
NYCA Zones
A West
B Genesee
C Central
D North
E Mohawk Valley
F Capital
G Hudson Valley
H Millwood
I
Dunwoodie
J New York City

K Long Island
4 External Zones
Hydro Quebec
PJM
ISO New England
IMO
NYCA Zones:
11 Internal
4 External

1. A pricing methodology for the cost of Energy at
each location in the NYS Transmission System.
2. LBMP is equal to the cost to serve the next MW
of Load at a specific location in the grid.
3. Taking into account:
Generation Offer Prices
Physical aspects of the NY Transmission
System including Congestion and Losses
For More Information refer to

NYISO Web Site:
Market Participants User's Guide (MPUG)
Technical Bulletins regarding LBMP:
6, 7, 20, 28, 30, 37, 45, 52, 56, 62, 69, 86, 89
NYISO Market Training Online Resources
Market Participants User's Guide (MPUG)
Technical Bulletins Regarding LBMP:

6, 7, 20, 28, 30, 37, 45, 52, 56, 62, 69, 86, 89
Market Training Online Resources

Generator Bus
Zone
Energy
Congestion
LBMP
Losses
the cornerstone
of the NYISO
Market Operation
Please provide feedback/comments to mgoyette@nyiso.com

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Locational Based Marginal Pricing .

LBMP Energy Market

Load Serving Entities (LSEs) provide bids to

LBMP Energy Market

Energy Sales and Purchases are

Locational Based Marginal Pricing .

The cost to serve the next MW of Load

Before we start lets review the

Generator or Power Supplier - A facility

Next we are going to define and demonstrate .

Using Economic Dispatch

Transmission limits are not reached

2 Zones (Geographical Area):

The Generator MW capacity is displayed in black .

When the Generator is selected to meet the load,

Simple 2 Bus, 2 Zone Examples

No Transmission Losses - These

Determine the Total Load

Select the most economic Generation

Gen #1 is the cheapest and

Select the MW Gen#1 can provide to

Gen #1 can provide up to 100 MW

Determine if all of the Load is met.

Step 5: Determine the MWs that are transmitted

20 MWs are transmitted over the Buffalo/Albany Line

Determining the LBMP ..

Determine the cost to serve the

Lets see which generator would be selected if

If the load in the West increased by 1 MW

If the load in the East increased by 1 MW

Regardless where the load increased Gen #1 will be

Generator #1 can provide the next MW of load at

Determine the Total Load.

Select the Most Economic

Determine the Cost of serving

Simple 2 Bus, 2 Zone Examples

No Transmission Losses (to be discussed

Total Load is 150 MW

Select the generator that is the most economic (cheapest):

Gen #1 is the cheapest and

If Gen #1 is selected for 100 MW how many MW will

If Gen #1 provides 100 MW (Full Capacity);

Continuing with the same example:

Gen #2 can provide the 50 MW to meet

Lets see which generator would be selected if

If the load in the West increased by 1 MW

If the load in the East increased by 1 MW

Regardless of where the load increased Gen #2

Determine the Total Load.

Select the Most Economic

Total Load = 150 MW

Determine the Cost of serving

Total Load = 150 MW

Using Economic Dispatch

To maintain an efficient and reliable Transmission

Simple 2 Bus, 2 Zone Examples

What is the Total Load?

Total Load is 220 MW

Select the generator that is the most economic (cheapest):

Gen #1 is the most economic at $25/MWh.

Gen #1 is selected for 100 MW

Select the next generator that is the most

Gen #2 is the most economic at $30/MWh.

Gen #2 is selected for 100 MW