1

Abstract-- Congestion in lines forces electricity markets to

operate with a costlier generation schedule. It is essential to
charge the loads responsible for congestion appropriately. This
paper proposes a method to allocate congestion costs to loads
and calculate incremental congestion costs.
This method quantifies the impact of congested lines on
optimal generation costs by computing a newly proposed Line
Impact Cost for each congested line. Using these Line Impact
Costs, total system congestion cost is apportioned to each
congested line. Using topological load distribution factors,
congestion cost associated with each congested line is
apportioned to each load. The sum of such costs for a load, one
from each line, represents the congestion cost for that load.
This paper also analyzes the relationship between
Incremental Congestion Cost and the electrical distance
separating loads and congested lines bringing out an empirical
relation between them. Performance of the proposed method
and its results on a 7-bus and the modified IEEE RTS-79
systems are reported and discussed.

Index Terms-- Congestion Cost, Optimal Power Flow,
Real Power Pricing.
I. INTRODUCTION
PF (Optimal Power Flow) without transmission line
flow constraints assigns generation to cheapest
generators to meet a load demand. Transmission line
constraints prevent cheaper generation from being delivered
to the loads. It warrants rescheduling to satisfy line flow
constraints. In this process, generators that are more
expensive may be scheduled. The increase in the optimal
generation cost due to inclusion of transmission line flow
constraints is called congestion cost.

New approaches are being developed to calculate the
congestion costs and to allocate them to the congestion
inducer [1]. In [2], the nodal pricing concept was
implemented in a pool model of the electricity market. The
nodal pricing method is based on incremental cost of
supplying energy to a load in the transmission grid.
Topological generation distribution factors were used to
allocate the congestion costs to generators in [3, 4]. The
traceable flow method was used in [5] to allocate congestion
costs to loads. In [6], author has proposed a method in which
optimal re-dispatch to alleviate transmission congestion has
been modeled as a nonlinear optimization program. ERCOT

Brinda Malladi, B. Venkatesh and E. F. Hill are with the Department of
Electrical and Computer Engineering, University of New Brunswick,
Fredericton, NB, E3B 5A3, Canada (e-mail: venkat@unb.ca).
(Electric Reliability Council of Texas) uses zonal congestion
management whereby the transmission grid, including
attached generation units and loads, is divided into a
predetermined number of congestion zones [7].

The above methods [1]-[7] do not relate the distance
between loads and congested lines to incremental congestion
costs associated with the loads. Such a relationship, even if
empirical, is helpful in visualizing the impact of electrical
location of a load in relation with congested lines and
inexpensively priced generators.

In this paper, a novel approach is proposed to allocate the
total congestion cost to congested lines and then apportion
them in turn to loads. The main idea of this approach is to
use Line Impact Costs to break down the total congestion
cost and reflect them on to lines. Then use these costs and
topological distribution factors to apportion them to the
loads. Problem formulation is presented in Section 2, the
solution algorithm in Section 3, test results in Section 4,
discussion in Section 5 followed by conclusions in Section
6.
II. MATHEMATICAL FORMULATION
This paper follows a sequence of steps to compute the total
congestion costs and apportion this cost to end users (loads)
appropriately.

First, the method computes total congestion costs using OPF
as step 1. Then, it segregates this cost and reflects them on
to congested lines as step 2 using Line Impact Costs. In the
third step, these line wise congestion costs are apportioned
to each load using topological load distribution factors.

Mathematical formulations of these three steps are given in
the following subsections.
A. Generation Dispatch Step 1
In this approach, the ISO (independent system operator)
employs an OPF software to optimally schedule generators.
It considers offered cost curves by GenCos (generator
corporations) to minimize the total generation cost.

Brinda Malladi, B. Venkatesh and Eugene F. Hill
Line Impact Cost Concept to Calculate Congestion
Costs in Deregulated Electricity Market
O
1-4244-0493-2/06/$20.00 2006 IEEE.
2
The objective function is,

Minimize Total System Generation Costs:
GC = ( )
=
+ + = =
=
n
1 i
i
c
Gi
P *
i
b
2
Gi
P *
i
a
i
GC )
Gi
(P
n
1 i
i
C (1)
subject to:

Power balance: f(P
G
, Q
G
, P
D
, Q
D
, V, ) = 0 (2)

Line flow Limits: LF
ij
< LF
ij
MAX
j i, for all lines
where, LF
ij
= LF(V
i

i
, V
j

j
, y
ij

i
) (3)

Real power generator Limits: P
GMin
< P
G
< P
GMax
(4)

where
i
c
i
b
i
a , , are the generator offered cost coefficients
at bus i, ( )
Gi
P
i
C is offered cost of i
th
generation,
Gi
P is the
real power generation at bus i and P
D
+jQ
D
is the system
power demand.

TCC gives total congestion cost and it is the difference
between system total generation costs with constraint (3)
(GC) and without constraints (3) (GC).
TCC = GC GC (5)

The above formulation can be solved in several ways. In this
paper, this formulation is solved using the method reported
in [8].
B. Line Wise Congestion Cost Step 2
In this paper, a novel method is proposed to apportion the
TCC to the congested lines. In doing so, the impact of each
congested line by way of its importance in the transmission
system is used to segregate the TCC into line wise
congestion cost.

The method computes the total generation cost using OPF
with and without a congested line i-j in the system. The
impact of exclusion of a congested line on the total system
generation cost quantifies its total worth. This Line Impact
Cost is computed as the increase in the total system
generation costs determined using OPF with and without
this congested line. This impact is called the Line Impact
Cost (LIC) and is associated with the congested line i-j.
These Line Impact Costs are used to break down the TCC
and apportion them to each line as Line Wise Congestion
Cost (LWC)

The steps to compute LWC for each congested line are as
below:

a) The total generation cost without observing line flow
constraint (3) is calculated as GC
b) For each congested line i-j, it is disconnected from the
circuit and OPF is solved observing line flow
constraints (3) on all the other lines which results in
total generation cost of GC
ij
.
c) Then the Line Impact Cost of the line between buses i
and j is computed as below:
LC
ij
= GC
ij
GC (6)
Line impact cost quantifies its independent effect on
increasing generation cost of the system. It quantifies
its role in connecting inexpensive generator to the
loads. The Line Impact cost brings out its criticality in
connecting loads to cheaper generators.
d) The TCC is reflected on to the congested lines using
line impact costs based on proportional sharing
principle as below computing what is known as Line
Wise Congestion Cost:
TCC *
ij
)
max
S
ij
(S *
ij
LC
)
max
S
ij
(S *
ij
LC
ij
LWC

= (7)
where )
max
S
ij
(S is the minimum amount of MVA
reduction needed to relieve congestion on the line.
LWC
ij
reflects contribution of (i-j)
th
line flow on TCC.
This Line Wise Congestion Costs are further allocated
to loads based on their contribution to the congested
lines in the next step.
C. Load Wise Congestion Costs Step 3
Congestion costs are charged to the loads. Thus, the Line
Wise Congestion Cost of each line is broken down and
assigned to all loads. Sum of such costs per load reflects
congestion cost assigned to a load. In order to break down
line wise congestion cost of a line to loads at buses,
contributions of the load to the line flow is established using
topological distribution factors. This method is given in [3].
The method traces contribution of each load m to line flow
between buses i to j. These distribution factors D
ij,m
are
calculated for each set of line flow and load. The
contribution of each load to the congested line is calculated
as D
ij,m
* S
Lm
. Breaking down the Line Wise Cost of i-j
th
line
proportionally to each load using D
ij,m
* S
Lm
and considering
all the congested lines, one gets congestion cost at the m
th

load as below:

1
1
1
1
1
]
1

|
|
|
|
|

|
'
'
'
'
'
\
|
|

|
'
\
|
=
ij
)
ij
(LWC *
m
Lm
S *
m ij,
D
Lm
S *
m ij,
D
m
CC
(8)

Incremental Congestion Cost (ICC) is defined as the change
in congestion cost (CC
m
)due to unit change in load at the m
th

bus (S
Lm
). It is computed as below:
3
Lm
S
m
CC
m
ICC = (9)
III. PROPOSED METHOD
In this section, the proposed approach to allocate congestion
cost to loads is summarized in the following steps:
1. Calculate the total congestion cost (5)
2. Apportion the TCC to each congested line, Line Wise
Congestion Cost LWC
ij
(7) by computing Line Impact
Costs.
3. Calculate the contributions of loads [3] to each
congested line i-j, D
ij,m*
P
Lm
. Apportion the Line Wise
Congestion Cost to each load m proportionally, based
on its load to line contributions (8).
4. Compute Incremental Congestion Cost (9)
IV. NUMERICAL RESULTS
The proposed algorithm is tested on a 7-bus system and the
modified IEEE RTS-79 system.


Fig. 1: A 7-Bus system

7-Bus System: Fig. 1 shows a 7-bus system. The system has
five generators and six loads. Loads at buses 2, 3, 4, 5, 6, 7
are 44.72, 122.98, 91.3, 130, 215.41 and 211.9 MVA
respectively. The system has 10 transmission lines out of
which three lines 1-2, 4-3 and 4-5 are congested.

Step 1: This step computes total congestion cost. To do this,
the generators are optimally scheduled with and without line
flow limits. Table 1 shows the line flows for both with and
without line flow constraints. The generator data is given in
Table 2. The generator output in MW with and without line
flow constraints and cost values are given in Table 3. The
results of generator dispatch with line flow constraints in
Table 3 indicate that congestion has been relieved in the
congested lines by reducing output of generators 1, 4 and
increasing output of generators 2, 6, 7.

TABLE 1: LINE DATA AND LINE FLOWS FOR THE TWO CASES
Flow (MW)
Line
Line
Limit
(MW)
With Line
Flow
Constraints
Without
Line Flow
Constraints
1-2 122 122 153.5
1-3 100 49.1 40.9
2-3 100 26 8
2-4 100 20.5 6.4
2-5 120 105.7 87
2-6 100 79 56.6
3-4 62 62 78.7
4-5 38 38 48.4
7-5 100 17.5 12.1
6-7 100 37 31.1

TABLE 2: GENERATOR DATA FOR THE 7-BUS SYSTEM
Generator Cost Coefficients
Gen
No.
Min
(MW)
Max
(MW)
a
($/MWh
2
)
b
($/MWh)
c
($/h)
1 10 400 0.0020 8.50 300
2 10 500 0.0014 9.48 420
4 10 250 0.0013 7.29 253
6 10 500 0.0013 9.22 380
7 10 600 0.0019 9.28 380

TABLE 3: GENERATOR OUTPUT FOR THE TWO CASES
Gen (MW) Cost ($/Hr) Gen No.
With Line
Flow
Constraints
Without
Line Flow
Constraints
With Line
Flow
Constraints
Without
Line Flow
Constraints
Change in
Generation
Costs
($/hr)
1 169.6 193 1799.55 2014.69 -215.14
2 150 30.7 1873.5 711.94 1161.56
4 134.6 200 1257.82 1763 -505.18
6 159.1 175.2 1879.48 2035.27 -155.79
7 153.6 167.7 1850.48 1989.58 -139.1
Total 8660.83 8514.48 146.35

From Table 3, it can be observed that total increase in
generation costs is 146.35 ($/hr). This is the total congestion
cost of the 7-bus power system.

TCC is now allocated to each congested line based on the
Line Impact Costs. Line Impact Costs for the three
congested lines are calculated as shown in Table 4. These
Line Impact costs are used to reflect the total congestion
cost on to each of the congested lines computing what is
known as Line Wise Congestion Cost. These LWC values
are also reported in Table 4.
4
TABLE 4: LC AND TC VALUES FOR THE THREE CONGESTED
LINES
Lines

1-2 4-3 4-5
Line Impact
Costs ($/hr)
505.98 150.7 242.17
Line wise
Congestion
Costs ($/hr)
111.2 17.953 17.172

Table 5 shows the load wise congestion cost in the last
column where rows corresponding to L
2
, L
3
etc, indicate
loads in the network. D*S
L
indicates the power contribution
of each load mto every congested line.
m
j i
LWC

indicates
the Line Wise Congestion cost of each congested line i-j
which is divided amongst each load. These are summed up
to get CC
m
, the congestion cost due to each load m for all the
three congested lines.

TABLE 5: CONGESTION COST ALLOCATION FOR THE 7-BUS
SYSTEM
Line 1-2 Line 4-3 Line 4-5
Loads D*P
L

(MW)
m
2 1
LWC


($/hr)
D*P
L

(MW)
m
3 4
LWC


($/hr)
D*P
L

(MW)
m
5 - 4
LWC

($/hr)
m
CC

($/hr)
L
2
14.1 12.93 0 0 0 0 12.93
L
3
28.6 26.19 41.1 11.95 0 0 38.14
L
4
14.7 13.45 14.6 4.249 26.7 12.2 29.85
L
5
34.2 31.34 5.25 1.528 9.59 4.37 37.24
L
6
21.2 19.43 0 0 0 0 19.43
L
7
8.62 7.89 0.76 0.22 1.4 0.64 8.75
Total 121.42 111.23 61.71 17.947 37.69 17.21
146.3
4



0
5
10
15
20
25
30
35
40
45
Load 2 Load 3 Load 4 Load 5 Load 6 Load 7
Congest ion Cost at Each Load in $

Fig. 2: Congestion Cost due to each Load for the 7-Bus System
Fig. 2 summarizes the results; it shows the congestion costs
to be paid by each load. The graph indicates that L
3
has the
highest congestion charge due to its high contributions on
the three congested lines. The load L
3
has to pay a
congestion charge of 38.14 ($/hr). Loads L
2
and L
7
have the
least congestion charges of $12.93 and $8.75.

Modified IEEE RTS-79 System: The modified IEEE RTS-
79 system was divided into two areas. The lines between
buses 121 to 325 and buses 223 to 318 connect the two
areas. The modifications on the test system are done in such
a way that Area-1 has cheaper generators and Area-2 has
expensive generators. When the system is optimized to
minimize the system real power generation cost, it will
automatically shift as much generation to Area-1 as possible
thus loading these two transmission lines to their MVA
limits. This is assuming that sufficient load exists in Area-2.

The generators are re-dispatched to relieve congestion in the
lines. The total congestion cost for the system is determined
as, 1649.44($/hr), which is the difference between optimal
generation costs with and without line flow constraints. The
TCC is apportioned to the two congested lines and further to
the loads. The line wise congestion cost obtained for line
between buses 121-325 is 409.04 ($/hr) and for the line
between buses 223-318 is 1240.40 ($/hr). These line wise
congestion costs are appropriately divided to the loads as
before using the proposed method.
V. DISCUSSION
The distribution factors are calculated based on the network
topology, and hence can be used to demonstrate distances
between lines and the loads in a system. An approach is
proposed in this work to determine the electrical distances
between the congested lines and loads. The distances can be
calculated as,
Distance = 1/ (D-Factor) (10)

Distance can be calculated between each transmission line to
each load in the system. Hence, the aggregate distance of
each load from the congested lines can also be determined
using this approach.

Table 6 shows the load distribution factors for each load m
with respect to the congested lines and aggregate distance
for each load in the 7-bus system. Table 6 also indicates
that, farther the load from the congested lines, smaller its D-
factor. Hence it can be considered that the inverse of these
factors give the distance between the lines and the loads.





5

TABLE 6: LOAD DISTRIBUTION FACTORS FOR THE THREE
CONGESTED LINES FOR THE 7-BUS SYSTEM

Table 6 gives the aggregate distance of the loads from the
three congested lines. The accuracy of the distance between
lines and loads depends on the accuracy of the D-factors.

TABLE 7: INCREMENTAL CONGESTION COST AND AGGREGATE
DISTANCE FOR THE 7-BUS SYSTEM










Table 7 gives the values of ICC for the given system. ICC is
a function of aggregate distances of the congested lines from
the loads, i.e. the farther the loads from the congested lines,
the lesser their ICC. A graph is plotted for ICC against the
distance for the 7-bus system and is shown in Fig. 3.

0.00
0.07
0.14
0.21
0.28
0.35
0.00 5.00 10.00 15.00 20.00 25.00
Increment al Congest ion Cost ($/MW)
Aggregat e Dist ance

Fig. 3: Variation of ICC with Aggregate Distance for the 7-bus system
The variation of incremental congestion cost with aggregate
distance for the modified IEEE RTS-79 system for areas 1
and 2 are shown in Fig. 4 and Fig. 5 respectively. From the
graphs, it is evident that the ICC is higher for the loads
closer to the congested lines, whereas it is lower for the
loads away from them.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
0 10 20 30 40 50 60 70 80
Aggregate Distance
I
n
c
r
e
m
e
n
t
a
l

C
o
n
g
e
s
t
i
o
n

C
o
s
t

(
$
/
M
W
h
)

Fig 4: Variation of ICC with Aggregate Distance for the Modified IEEE
System (Area-1)
0
0.1
0.2
0.3
0.4
0.5
0.6
0 50 100 150 200
Aggregate Distance
I
n
c
r
e
m
e
n
t
a
l

C
o
n
g
e
s
t
i
o
n

C
o
s
t

(
$
/
M
w
h
)

Fig 5: Variation of ICC with Aggregate Distance for the Modified IEEE
System (Area-2)
VI. CONCLUSION
In this paper, an effective transmission congestion cost
allocation method has been proposed and illustrated using a
simple 7-bus system and the modified IEEE RTS-79 system.
The method is focused on distributing the charges only to
the exact transmission users of the congested lines instead of
distributing them to the entire system. The concept of Line
Impact cost is used to divide the TCC among the congested
lines based on their contributions and impact. Incremental
congestion cost is used to demonstrate the change in
congestion cost due to unit change in load for the given
system condition. ICC is shown as a function of aggregate
distance of the loads from the congested lines, i.e. farther the
loads from the congested lines, lesser is its ICC value. This
makes the approach reasonable and self explanatory.
Topological Load Distribution Factors (D
ij,m
)
Line
L
2
L
3
L
4
L
5
L
6
L
7

1-2 0.32 0.23 0.16 0.26 0.10 0.04
4-3 0.00 0.33 0.16 0.04 0.00 0.00
4-5 0.00 0.00 0.29 0.07 0.00 0.01
Total 0.32 0.57 0.61 0.38 0.10 0.05
Aggregate
Distance 3.17 1.76 1.63 2.65 10.15 19.65
Loads
Aggregate
Distance
Incremental
Congestion
costs
($/MWh)
L
2

1.63 0.33
L
3

1.76 0.31
L
4

2.65 0.29
L
5

3.17 0.29
L
6

10.15 0.09
L
7

19.65 0.04
6
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