This thesis develops a general combined pool/bilateral electricity market model that allows for the simultaneous dispatch of both pool and bilateral trades. The latter are usually negotiated privately among the generators and loads and result in long-term agreements of the order of days to months. The bilateral contracts can be firm or non-firm but in all cases they stand for physical rather than financial obligations to generate a certain amount of power at some bus and to consume it at some other specified point in the power network. The power consumed by the loads that does not come from bilateral contracts is supplied by the pool generation, and is traded in the so-called spot markets whose time horizons can range from a day to as close as one hour.; In this combined market model, all ancillary services including transmission losses and congestion management are supplied by the pool. The market clearing process identifying the scheduled generation levels and the nodal electricity prices (also known as locational marginal prices) is defined by the solution of an optimal power flow which minimizes the total offered generation cost plus any curtailment or non-curtailment costs. This optimization, which is performed centrally by a system operator, simultaneously satisfies the power balance at all the network buses while respecting the power flow limits in all lines including transmission losses. In particular, the market clearing process takes into consideration generation limits imposed by the bilateral contracts, a constraint which as this thesis demonstrates can have a profound impact on the market performance.; The performance of the combined pool/bilateral market is evaluated both technically and financially. The technical performance of a specific market is measured in terms of the pool and bilateral generation levels, by the degree of transmission congestion and by the transmission losses. The financial performance of individual market participants is based on the nodal prices, power transfer rates, as well as on the revenues and expenditures of both generators and loads.; Simulation results indicate that careful coordination of the pool and bilateral trades is essential as certain mixes can force out of merit generator operation, unnecessary transmission congestion, lower generation revenues, and higher consumer payments. This is particularly so if the bilateral contracts are firm.; In order to lessen the consequences of inefficient pool/bilateral mixes, a variation of the combined pool/bilateral market is also examined under which the participants may submit curtailment offers for their firm contracts and non-curtailment bids for their non-firm contracts. The market clearing procedure in this case determines the levels of generation, the nodal prices, as well as the levels of contract curtailment.; Finally, the Aumann-Shapley unbundling procedure is applied to the combined pool/bilateral model with firm contracts. This enables the decomposition of the generation levels into three different service components, namely pool generation, bilateral generation, as well as a generation term supplying ancillary services attributed to the bilateral trades. The unbundling procedure also calculates the corresponding costs associated with these "unbundled" services and allocates them among the different market participants. This service and cost unbundling process is then implemented into a Pay-as-Bid pricing mechanism and compared with the conventional marginal pricing.
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