With energy markets and decentralization of
electricity generation authority, revenue maximization has become the driver for
operations. However, little effort has been devoted to develop an appropriate
representation of energy prices, the main outcome of energy markets, for modeling
purposes. Some work has been directed to developing statistical price forecasting models and explicit economic models of electricity markets, including
optimal bidding strategies for generators under perfect competition
and duopolistic models. Unfortunately, the water resources
community still relies on simplistic representations of energy prices for planning models,
assuming either an average price for each decision period or a two-part (peak/off-peak)
approximation of the price variability.