The deregulation of electricity markets hasdiversified the range of financial transaction modes betweenindependent system operator (ISO), generation companies(GENCO) and load-serving entities (LSE) as the maininteracting players of a day-ahead market (DAM). LSEs sellelectricity to end-users and retail customers. The LSE that ownsdistributed generation (DG) or energy storage units can supplypart of its serving loads when the nodal price of electricity rises.This opportunity stimulates them to have storage or generationfacilities at the buses with higher locational marginal prices(LMP). The short-term advantage of this model is reducing therisk of financial losses for LSEs in DAMs and its long-termbenefit for the LSEs and the whole system is market powermitigation by virtually increasing the price elasticity of demand.This model also enables the LSEs to manage the financial riskswith a stochastic programming framework.
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