specifically, Léautier (2000) shows that a marginal increase in transmission
capacity has two effects: a direct effect so that cheap power substitutes for expensive
power, and an indirect effect that reflects the results on other transmission lines due to the
expansion. The author defines the cost of congestion as the difference between the price
actually paid to generators and the price that would have been paid absent congestion.
Such a difference is called the “out-turn.” Additionally to the Laffont-Tirole menu of
revenue sharing rules, Léautier defines an “uplift management rule” that makes the
Transco resp |
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