Modeling the Retailer Profitability in the Electricity Market for Strategic Financial Planning

A. Gandelli, A. Gianaschi, S. Marchi, and R.E. Zich (Italy)


Modelling and simulation, Financial planning, Forecast energy market.


In this paper, through modelling consumer utility and retailer profitability, we provide a tool to financial analysts for simulating the entrance of new-comers in the downstream market, in competition with the incumbents. This modelling has the advantage of ensuring stable retailer profitability, proper financial planning and is conductive of efficient network operations. In the liberalised market, new players operate as retailers, purchasing electricity in the wholesale market and selling it to residential customer which, due to its small power consumption, is not eligible to purchase electricity from power companies. In fact, though residential customers are free to chose the preferred retailer, only a small share have switched supplier, staying with their local utility. In order to foster market competition, a liberalised market should provide all customers with substantial switching options. This works deals with a multi-retailer, multi-subscriber approach, considering multi-zone tariffs and introducing a power-factor dependent billing. In fact, through digital metering, it is possible to allot negative power factor effects to end-users, without incurring in discriminatory pricing.

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