How Congestion Affects Prices

A Single Price: No Congestion

In a single-bus system, all generators and loads connect to the same electrical node. There are no transmission lines — so there are no transmission constraints. The LMP (Locational Marginal Price) is identical everywhere.

This system has:

• Coal Plant: 600 MW capacity, bids $30/MWh (cheap baseload)
• Gas Peaker: 200 MW capacity, bids $80/MWh (expensive backup)
• Load: 500 MW

Since everything is at one node, the cheapest generator always serves load first. Coal dispatches at 500 MW and sets the price. The gas peaker isn't needed.

The LMP is $30/MWh at the single bus — the same everywhere.