Risk assessment and control for distribution companies in electricity market environment

This paper presents a methodology to manage the market risk faced by a distribution company in the emerging electricity market environment. The risk is due to uncertainty in load forecasting, direct power-purchase for large users, and credit default of users. An optimization model that integrates these three kinds of uncertainty is built aiming at minimizing the loss of the distribution company concerned. This model permits the representation of an integrated risk management problem by means of value-at-risk. Under the stochastic programming framework, a numerical example is provided to illustrate the feasibility of our approach.