How do transmission constraints impact LMPs?
Transmission constraints increase the likelihood of higher prices within a congested area. On a constrained system, the least-cost generator cannot be dispatched, and a higher-cost generator within the constrained area must be paid their offer price to alleviate the congestion. That increase in cost is reflected in the nodal LMP. As the nodal LMP is aggregated for a zone, the average cost of energy within that constrained zone is also likely to increase.
