Mansour Charwand - Department of Electronic and Electrical Engineering Shiraz University of Technology Shiraz, Iran
Mohsen Gitizadeh - Department of Electronic and Electrical Engineering Shiraz University of Technology Shiraz, Iran

In a competitive electricity market, Distribution Company (DisCo) seeks strategies to procure their energy needs from different resources (pool, bilateral contracts, and their own generation facilities) at minimum cost while controlling the risk. In this paper, a novel method is proposed to address the electricity procurement problem of DisCO using the concept of Expected Downside Risk (EDR) regarding its midterm procurement strategies. The financial risk associated with the market price uncertainty is incorporated explicitly as a constraint in the mixed-integer linear stochastic optimization problem. The method can be used as a tool for assessing the risk levels, considering whether a DisCO is risk-taking or risk-averse. Illustrative example shows the impact of market price uncertainty on DisCo’s schedule and discusses the way DisCos could decrease financial risks by managing expected costs.

DisCO; financial risk; stochastic programming; portfolio optimization