Marginal cost pricing of electricity

The discipline is economics and the phenomenon is the power system. The purpose of this system is to produce, transmit and consume electricity in such a way that the sum of consumers and suppliers surplus in maximized. This is accomplished by the means of marginal cost pricing. The concepts of the power system and the relations prevailing between and among them are picked out, defined and analyzed in the frames of economic theory and operations research. Methods are developed aiming at efficient prices so that the short run function of the power system is managed in such a way that the sum of conumers and suppliers surplus is maximized within the framwork of this system, i.e. value of service of the power system is maximized. The task of developing such methods is accomplished subject to mixed production resources, transmission losses, periodic demand and also when there is lack of information concerning future and cost conditions. The main results are methods which take to account the conditions stated above. Methods not only allowing for traditional cost minimizing but also for maximation of value of service including a process of reaching optimum by gradual adaption when demand and cost curves are not known in advance. (author)