Locational Marginal Pricing Example

Generator B

Bid = $30

Load 1 Incremental Demand

is supplied by Generator A

LMP = $20

Load 3 Incremental Demand

is supplied by Generator A

and Generator B in equal proportion

LMP = 0.5*$20 + 0.5*$30 = $25

Load 2 Incremental Demand

is supplied by Generator B

LMP = $30

Transmission Constraint -

not able to transfer power

from Generator A to Load 2

Generator A

Bid = $20

Limited ability

to transfer power

from Gen. A to Load 3

Load 1

Load 3

Load 2

CONSTRAINED Case

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