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Non-Physical Loss Handling: A Market Clearing Engine Study of the NEMS

Non-Physical Loss Handling: A Market Clearing Engine Study of the NEMS
Lu Feiyu, Senior Market Analyst
Original Publication Date: September 2004

This paper studies the reasons for non-physical loss handling in the NEMS and focuses on the instances where it is triggered by a negative marginal offer price.  It describes how the NEMS approximates the quadratic loss function and follows the solution step by step.  A case study of an actual negative price case on 6 October 2003 is included.