Course EE 394V

Restructured Electricity Markets: Locational Marginal Pricing

Fall 2018

Unique Number 17075

Meeting time: Tuesday and Thursday, 2:00pm to 3:15pm. 

    Meeting location:  EER 1.504

Ross Baldick
Department of Electrical and Computer Engineering 
EER 7.872 
The University of Texas at Austin

Tel: (512) 471-5879 

Office hours: Tuesday and Thursday, 3:30pm to 4:45pm, EER 7.872.

Please email me if you want to see me outside of these office hours.

Course description of "Restructured Electricity Markets: Locational Marginal Pricing"

This course focuses on the "locational marginal pricing" (or "nodal") model of "organized" or "centralized" day-ahead and real-time electricity markets, which is in place in the Eastern United States, the Midwest United States, California, the Southwest Power Pool, and Texas (the Electric Reliability Council of Texas, ERCOT). The course uses the ERCOT nodal market as its main example, but features of other North American markets, such as capacity markets, are also discussed. We will consider the solution of power flow, formulate optimal dispatch as an optimization problem, consider offer-based economic dispatch, transmission and unit commitment issues, and discuss pricing rules and incentives in markets, particularly in the context of transmission limits. The pedagogical approach is to first discuss pricing in organized electricity markets in the absence of transmission constraints and then introduce transmission constraints and their implications.  We will also discuss a number of other topics including energy and transmission price risk hedging, network models, and capacity adequacy.  

This course covers technical topics in power systems, optimization, and economics at a graduate level and is presented in a mathematically rigorous fashion. A challenge in such a course is that few students will have background in all of these areas, and different students will have different backgrounds.  Typical students should have at least an undergraduate technical background in at least two of these areas and expect to read outside of the class for any background material that they have not studied prior to this class.  The first half of the semester will rapidly review the background material for the class. The second half of the semester will then integrate this background material.

The slides for this course are available for downloading from, and the links are highlighted below and summarized in an overview.

Downloadable video of the course materials are available from the CUSP website at the University of Minnesota.

Topics include:

To summarize, the course will integrate a number of concepts from economics, electric power, and optimization theory.  The emphasis will be rigorous and we will present various theorems and results formally.


Please come to office hours with prepared questions.

I may have to cancel one or two classes during the semester in order to attend conferences.  We may need to schedule make-up classes for these cancelled classes since the semester will be full of material to cover.

I do not take attendance and you are free to attend or not attend class as you choose.  However, if you come to class, please be prompt.  Please be seated in class by the time the start-of-class bell rings.  If a homework is due, please put it on the desk in the classroom prior to the start of class.


The course will cover topics from a number of fields including power systems, optimization theory, and economics.  Consequently, there is no single textbook for this class.  However, the slides are available online and I will plan to distribute copies of relevant papers if necessary.  Two useful references for the power systems economics material is:

For a more general reference on microeconomics, see: 

For material on power systems, see:

For material on optimization, see:


The class will build on a background of undergraduate economics, undergraduate electric power or circuit theory, and continuous and mixed-integer optimization theory.  I do not expect every student to have a strong background in all three areas.  However, if you do not have a background in at least two of these areas, you may struggle in the class.  I encourage you to take the course as credit/no credit if you are concerned about the background material.  (If you are looking for a non-technical introduction to locational marginal pricing, I also teach a one-day short-course that might suit you instead.  See for details.)

For people from industry:

I strongly encourage people from industry to attend.  There are two basic options for attendance by non-students:

Homework policy:

There will be occasional homeworks in this class.

Exam policy:

There will be three in-class mid-terms: Tuesday, September 25; Thursday, November 1; and, Thursday, December 6. There will be no final.

Grading policy:

A final score will be calculated based on:

Other information:

Allegations of Scholastic Dishonesty will be dealt with according to the procedures outlined in Appendix C, Chapter 11, of the General Information Bulletin,

The University of Texas at Austin provides, upon request, appropriate academic adjustments for qualified students with disabilities. For more information, contact the Office of the Dean of Students at 471-6259, 471-4241 TDD, or the College of Engineering Director of Students with Disabilities, 471-4321.

Classroom evacuation for students:

All occupants of university buildings are required to evacuate a building when a fire alarm and/or an official announcement is made indicating a potentially dangerous situation within the building. Familiarize yourself with all exit doors of each classroom and building you may occupy. Remember that the nearest exit door may not be the one you used when entering the building. If you require assistance in evacuation, inform your instructor in writing during the first week of class. For evacuation in your classroom or building:

1. Follow the instructions of faculty and teaching staff.

2. Exit in an orderly fashion and assemble outside.

3. Do not re-enter a building unless given instructions by emergency personnel.