Excess energy marketing problem

Abstract

The excess energy marketing problem (EEMP) is the successful selling of Pacific Northwest (PNW) surplus electrical energy, as constrained by the 1964 Regional Preference Act (PL 88-552) and the available capacity on the Pacific Northwest/Southwest Inertie Network. A favored strategy would simultaneously maximize PNW revenues and Pacific Southwest (PSW) savings from dual-fuel displacement while cultivating other markets. If the price for excess energy (firm/nonfirm) were allowed to float to market conditions, the present (1983) Intertie capacity were increased and new DC interties were planned, and conservation were used to level the magnitude and extend the duration of the present surplus energy, then one solution and the recommended marketing policy is an innovative Stackelberg game. Initially, this is a two-person non-zero sum bimatrix game with the leader Bonneville Power Administration (BPA) and the follower California utilities (CU). The strategic form of the game is a Prisoner's Dilemma in which BPA pursues an iterative tit-for-tat scheme following determination of excess energy magnitude, duration, and equilibrium price. Two lower bounds for revenue estimates from sans-strategic policies are theorized by Fourier series and vector autoregressive models. An upper bound for revenues, which might be obtained by pursuing this Stackelberg game, is theorized by assuming BPA adopts the game as policy and CU cooperates at each stage over a game horizon determined by accurate supply/demand forecasts. This dynamic stochastic Stackelberg game is an EEMP solution that will benefit both players, provide Regional economic stability, and spur National energy independence.