2006 IEEE PES Transmission and Distribution Conference and Exposition Latin America, Venezuela

Using MANOVA Methodology in a

Competitive Electric Market under
Uncertainties
D. Moitre, Senior Member, IEEE, and F. Magnago , Senior Member, IEEE

hypotheses which sustain a vertical and horizontal

Index Terms — MANOVA, Competitive Electricity Markets.
I. NOMENCLATURE
The following notation is used in this paper:
X Random variable (px1).
Σ Covariance matrix (pxp).
µ Mean (px1).
Np( µ , Σ ) Normal distribution with mean µ
covariance Σ .
τi First factor, i treatment vector (px1).
βj Second factor, j treatment vector (px1).
γ ij Iteration between i and j (px1).
ε ijk Experimental error, repetition k, treatments i
and j (px1).
X Sample mean (px1).
II. INTRODUCTION
The opening of electricity markets implies the development of
new methods for long term planning. In this type of markets,
Regulators have to deal with new uncertainties [1]. Decisions
related to these competitive markets are based on a set of
∗
D. Moitre y F. Magnago are with Universidad Nacional de Río Cuarto,
Argentina (dmoitre@ing.unrc.edu.ar; fmagnago@ing.unrc.edu.ar).
segmentation of the generation, transmission and distribution
sectors in different functions [2]. In Argentina, this theoretical
model is implemented and, after more than ten year operation,
produces a great amount of data available that has to be
analyzed by the Regulators in order to proceed with new
regulations or to produce changes in the actual model.
Therefore, having a methodology that can help them on these
issues becomes critical, based on the available data and the
knowledge of the problem, experimental design methodology
can contribute to this matter.
Experimental design is a set of tests carried out on process
or systems where inputs are changed in order to observe the
output response and their relation with inputs. The main
objective of the experimental design is to determine which
variables are most influential on the output response, that is, to
determine the parameters which lead to the best possible
output response. Initial experimental designs were applied in
the area of agronomy and chemistry for the selection of the
most efficient factor combination as described in [3]. Later,
the electronic industry used this methodology for the
development of products and process. Thus, experimental
design becomes one of the most important tools in the
statistical analysis of data in several areas, allowing companies
to improve within an aggressive competitive environment.[4].
Recently, the idea of implementing experimental design in the
power system area has been suggested. The application of
and single variable statistical model (ANOVA) in electrical
markets is suggested in [5]-[6]. Multivariate analysis
(MANOVA) for line congestion problems is proposed in [7]-
[8]. The aim of this paper is to analyze the implementation of
multivariate analysis (MANOVA) to study the influence of
different factors, such as days and months on the market
prices. To illustrate the implementation of this methodology,
the Argentinean electric market is used.
III. THE STATISTICAL MODEL
Factorial experiments are widely used within the area of
experimental design when experiments involve several factors
and the study of their joint effect on a response is necessary.
The simplest type includes two factors: factor A with a levels
and factor B with b levels, however, this concept can be
extended to a multivariate case.
The models can be classified in three different groups:
ƒ fixed: each factor has predetermined levels,
ƒ random: all factors have levels randomly selected,
ƒ mixed: combination of random and fixed models.

1-4244-0288-3/06/$20.00 ©2006 IEEE

 This paper will focus on a two way multivariate analysis
TABLE I: MANOVA
(MANOVA) applied to fixed statistical models, since this is
the WEM case. Hence, this model is explained in detail in this Source of Sum of squares Degree of freedom
variation
Section. Let’s consider the following random variable: Factor 1 SSP1 a-1
X ijk ∈ ℜ p , i = 1,..., a j = 1,..., b k = 1,..., n (1)
Factor 2 SSP2 b-1
where a and b are the levels of the first and the second factors
respectively, n is the simple size for any ab level combination. Interaction SSPint (a-1)(b-1)
Assuming the following hypothesis [9]:
Error SSPres ab(n-1)
ƒ the samples are independent,
ƒ all populations share the same covariance matrix Σ ,
ƒ experimental errors are normally distributed: Np( 0 , Total SSPcorr abn-1
Σ ).

Furthermore, if the simple size is big enough, the last
hypothesis can be relaxed (Central Limit Theorem). Hence,
the observations represented by Eq. (1) can be described by
the following statistical lineal model [9]:
X ijk = µ + τ i + β j + γ ij + ε ijk (2)
where µ is the total media, τi denotes the effect of level i of the
first factor, βj the effect of level j of the second factor, γij the
interaction effect between level i of the first factor, and level j
of the second factor, and εijk the experimental error.
Moreover, the experimental observations related the
statistical model described by Eq. (2) can be formulated as
follow:
( ) (
x ijk = x + x i • − x + x • j − x + ) (3)
( ) (
x ij − x i• − x • j + x + x ijk − x ij
where x is the total sampled mean vector, x i• represents the
sampled mean vector that correspond to the first factor level i,
x • j is the sampled mean vector of the second factor level j,
and x ij is the sampled mean vector due to the first factor level
i and the second factor level j.
The generalized variance estimation can be represented by:
a b n a
In some experiments, factors can have different levels. The
interaction between them can mask the principal effect if this
interaction is considerable. Therefore, before reaching any
conclusion, this interaction effect must be studied.
To determine the interaction between two factors, the
following hypothesis testing is performed:
H 0 : γ 11 = γ 12 = ... = γ ab = 0
(5)
H1 : at least one γ ij ≠ 0
considering the following relation [9]:
Λ* =
SSPres
SSPint + SSPres
(6)
) where Λ* is known as Wilks’s Lambda. The hypothesis H0
is rejected if Λ* is less than a given threshold. Normally this
test is done before testing the effect of the principal factors. In
the case that the interaction test fails, then no additional test is
performed.
Once this test is passed, the effect of different factors is
calculated using the following hypothesis testing are
performed:

¦¦¦ ­®¯(x − x x ijk − x ½¾ =

)( ) ¦ (
­bn x − x x − x t ½ )( )
t
ijk ® i• i• ¾ H 0 : IJ1 = IJ 2 = ... = IJ a = 0
¿ ¯ ¿ (7)
i =1 j =1 k =1
  

i =1 

H1 : at least one IJ i ≠ 0
SSPcorr SSP1
b
+ ¦ ­®¯an(x
j =1
•j −x )(x • j − x )t ½¾¿ H 0 : β1 = β 2 = ... = β b = 0
H1 : at least one β j ≠ 0
(8)
  

SSP2
(4)
a b the statistical value used for the hypothesis testing
+¦¦ (
i =1 j =1
­n x − x − x + x x − x − x + x t ½
® ij
¯
i• •j ij i• •j )(
¾
¿
) described by Eq. (7) and Eq. (8) is similar to the one described
by Eq. (6):
 

SSPint SSPres
a b n
Λ1* = (9)
SSP1 + SSPres
+¦¦¦ (
i =1 j=1 k =1
­ x −x x −x t½
® ijk
¯
ij ijk ij ¾
¿
)( )
 
SSPres
SSPres Λ 2* = (10)
SSP2 + SSPres
where SSPcorr is the total sum of squares, SSP1 is the sum of
squares for the main effect due to the first factor, SSP2 , is the
sum of squares for the main effect due to the second factor, * *
the hypothesis H0 is rejected if Λ 1 and Λ 2 are below a
SSPint is the sum of the interaction, and SSPres is the sum of threshold. Once the multivariate analysis indicates that an
squares of the errors. effect exists, comparisons must be drown to detect specific
The test procedure is arranged in an multivariate analysis of
variance (MANOVA) table, shown in Table I.
differences. There are several comparison methods, such as
the Bonferroni method or Hotelling method [9].
IV. NUMERICAL RESULTS
Market prices of Argentinean WEM [10] are analyzed to
illustrate the application of the MANOVA methodology. For
this example the effect of the month of the year and the day of
a week over the market prices are studied. It is assumed that
the spot price is determined every hour during twenty four
hours seven days a week. These prices can be considered as
the result of a bi-factorial experiment where the first factor is
the month of a year analyzed at twelve levels, and the second
factor is the day of the week analyzed at seven levels. Each
factor is previously determined, hence, a fixed factor model
can be selected. MATLAB. Statistical Toolbox is used for the
simulations.
A. Data normalization
The first step is to verify if the data satisfy the statistical
lineal model hypothesis of Eq. (2). The error, also referred as
residual, is defined as the difference between the observation
value X ijk and the estimated value X ij :
εˆijk = X ijk − X ij (11)
The accumulative distribution residuals graphic is used as
the initial diagnostic tool [9]. The residuals are normally
distributed with zero mean; therefore its representation should
be a line. As an illustration, Fig. 1 shows the simulation results
for Monday, January, hour 24.
Fig. 1 Market price residuals
Figure 2 illustrates the same case as Fig. 1 but including the
normalized residuals corresponding to hour 24 for all the
groups considered.
Fig. 2 Market price, normalized residuals.
There are residuals that are bigger than the rest of the
residuals; these residuals are identified as outliers. Since the
presence of one outlier may alter the analysis of the results,
before any analysis, the origin of these outliers should be
determined. A simple technique to identify outliers is to
examine the accumulative distribution of the normalized
residuals. In this example a normalized residual that is outside
the region (-3,3) is assumed as a potential outlier
The observation of Fig. 2 and the normal distribution test
proposed by Shapiro & Wilks [9], suggest that market prices
are not normal distributed. Normal test results from the WEM
market price at each hour are described in Table II
(Appendix).
Although the normality hypothesis testing is not satisfied,
the number of outliers is not severe enough to stop the
analysis.
B. Hypothesis testing
The effect of the interaction among different factors is
performed using the following hypothesis testing:
H 0 : γ 11 = γ 12 = ... = γ 12 7 = 0
(12)
H1 : at least one γ ij ≠ 0
based on Eq. (19), lambda is:
SSPres
Λ* = = 0.005746 (13)
SSPint + SSPres
then, F = 0.975 and p = 0.7333; therefore H0 is rejected, that
means that there is no experimental evidence about an
interaction between months and days.
Next, the impact of different months on the market price is
determined:
H 0 : IJ1 = IJ 2 = ... = IJ12 = 0
(14)
H1 : at least one IJ i ≠ 0
lambda for this case is:
 SSPres
Λ* = = 0.064188 (15)
SSP1 + SSPres

then, F = 3.122 and p is negligible, consequently, H0 is

rejected and is deduced that months affect the market price.
The same procedure is followed for different days during
the year:

H 0 : β1 = β 2 = ... = β 7 = 0
(16)
H1 : at least one β j ≠ 0
then:
SSPres
Λ* = = 0.400154 (17) Fig. 3: Confidence intervals for months. Market Prices ($/MWh)
SSP2 + SSPres

Figure 4 shows the confidence intervals where the effect of

from this result, F= 1.786 and p is almost zero. Hence, H0 is
days on the market price at hour 12 can be inferred.
rejected and concluded that days affect the market price.

C. Treatment effect
On condition that the hypothesis described by Eq. (14) and
Eq. (16) are rejected, then, it is important to identify the
factors that influence the rejection. Comparisons are
performed in order to identify specific differences among days
and months. The effect of months and days on the market
price is estimated by Eq. (18) and Eq. (19) respectively:

τˆ i = x i • − x ; i = 1,...,12 (18)

βˆ j = x • j − x ; j = 1,...,7 (19)

on the basis of Bonferroni methodology [9], the multiple

confidence intervals at 95% are built as a function of the
market prices for each month of the year.
µˆ = X µˆ i = µˆ + τˆ i i = 1,...,12
Similarly, the multiple confidence intervals at 95% are built
based on the market prices for each day of the week:
µˆ = X µˆ j = µˆ + βˆ j j = 1,...,7
Table III and Table IV (Appendix) give the market price
mean value at hour 12 µ (12) , the standard error and the lower
(LI), and upper (LS) limits for the interval at 95% related to
months and days respectively.
Figure 3 illustrates the confidence intervals, and the
influence from the months on the market price for hour 12 can
be observed.
Fig. 4: Confidence intervals for days. Market prices ($/MWh)
The next step is to analyze the existence of groups where
(20) the market price is homogeneous. The method of multiple
comparison (5%) from Bonferroni is used for this purpose.
Table V and VI show the average market price for months and
days considering hour 12 respectively.
From Table V, five homogeneous groups can be identified:
a) October, June, and July; b) June, July, May, March, April
(21) and January; c) July, May, March, April, January, February,
November and September; d) March, April, January,
February, November, September, and August; e) February,
November, September, August, and December.
Similarly, as results from Table VI, there are two
homogeneous groups: a) Sunday, Saturday, Friday,
Wednesday, and Monday; b) Saturday, Friday, Monday,
Tuesday, and Thursday.
Another important test is to compare different market
prices. Market price comparison can be done from one day
type (i.e. Sunday) with respect to another day type (i.e.
Monday). This comparison can be done using multiple
contrasts (95%) [8]:

H 0 : µ L (k ) − µ D (k ) = 0 k = 1,...,24 (22)
 SEPTEMBER 44,12393 0,844094 42,46238 45,78548
Table VII illustrates the test results. from which it can be OCTOBER 37,41957 0,831207 35,78339 39,05575
inferred that market prices during Sundays are significantly NOVEMBER 43,69457 0,844094 42,03302 45,35612
different compared to market prices during Mondays. Table DICEMBER 47,25071 0,831207 45,61453 48,88690
VIII shows the estimations (95%) related to the TABLE IV: PRICE MEAN , HOUR 12, DAILY
differences µ (k ) − µ (k ); k = 1,...,24 . Similar tests
M S
µ (12) Error LI LS
DAY
can be done for all other days, for example Table IX and X ($/MWh) ($/MWh) ($/MWh) ($/MWh)
show results from a comparison between Wednesday and
MONDAY 43,15354 0,641423 41,89094 44,41615
Thursday, concluding that results for both days are
TUESDAY 43,05650 0,641423 41,79389 44,31911
comparable. WEDNESDAY 43,00608 0,641423 41,74348 44,26869
Analogous tests can be produced between different month THURSDAY 43,04496 0,641423 41,78235 44,30756
types. For example a test to compare December and July can FRIDAY 42,43746 0,641423 41,17485 43,70006
be done as follows:
SATURDAY 41,60292 0,635671 40,35164 42,85420
SUNDAY 40,52708 0,641423 39,26448 41,78969
H 0 : µ Dic (k ) − µ Jul (k ) = 0 k = 1,...,24 (23) TABLE V: MONTHLY PRICES, H OUR 12

µ (12)
In this case, from the results shown in Tables XI and XII, it MONTH 1 2 3 4 5
($/MWh)
can be deduced that market prices for these months are
different. The same analysis for April and May is illustrated in OCTOBER 37,41957 x
Tables XIII and XIV, in this case the fact that prices are JUNE 39,14564 x x
related can be inferred. JULY 40,58321 x x x
MAY 41,56300 x x
V. CONCLUSION
MARCH 42,03057 x x x
The application of the methodology of analysis of variance APRIL 42,01564 x x x
of multivariate data (MANOVA) for competitive electric JANUARY 42,25836 x x x
market has been explored. This technique has been applied to FEBRUARY 43,33500 x x x
the Argentinean electric market. NOVEMBER 43,69457 x x x
Results suggest that statistical multivariate methods may SEPTEMBER 44,12393 x x x
become very useful for Market Regulators to evaluate the
AUGUST 45,42871 x x
impact of different factors on the determination of economic
DECEMBER 47,25071 x
parameters such as the market price.
TABLE VI: D AILY PRICES, HOUR 12

VII. A PPENDIX µ (12)

DAY 1 2
($/MWh)
TABLE II: TEST – PRICE NORMALITY
Hour SW - W p Value Hour SW - W p Value SUNDAY 40,52708 x
1 0,96574 0,000 13 0,94963 0,000 SATURDAY 41,60292 x x
2 0,96876 0,000 14 0,94833 0,000 FRIDAY 42,43746 x x
3 0,96383 0,000 15 0,94740 0,000
WEDNESDAY 43,00608 x x
4 0,95731 0,000 16 0,95052 0,000
5 0,95486 0,000 17 0,95270 0,000 MONDAY 43,15354 x x
6 0,95458 0,000 18 0,94639 0,000 TUESDAY 43,05650 x
7 0,96034 0,000 19 0,88318 0,000 THURSDAY 43,04496 x
8 0,96029 0,000 20 0,90680 0,000
TABLE VII: AVERAGE DAILY PRICES- CONTRAST
9 0,95195 0,000 21 0,90515 0,000
Error Gl
10 0,95419 0,000 22 0,89608 0,000 Λ* F Effect G l p Value
11 0,94791 0,000 23 0,87394 0,000 0,712702 4,333440 24 258 0,00
12 0,95035 0,000 24 0,96255 0,000 TABLE VIII: C ONTRATS ESTIMATION DAILY PRICES
TABLE III: PRICE MEAN , HOUR 12, MONTHLY Hour k
µ M
(k ) − µS Hour k M
µ (k ) − µ S
µ (12) Error LI LS ($/MWh) ($/MWh)
Month
($/MWh) ($/MWh) ($/MWh) ($/MWh) 1 0,682917 13 2,746250
2 0,434583 14 2,801375
JANUARY 42,25836 0,831207 40,62217 43,89454 3 0,124625 15 2,770250
FEBRUARY 43,33500 0,869297 41,62384 45,04616 4 0,515833 16 2,746000
MARCH 42,03057 0,831207 40,39439 43,66675 5 0,827958 17 2,998250
APRIL 42,01564 0,844094 40,35409 43,67719 6 2,275083 18 2,902292
MAY 41,56300 0,831207 39,92682 33,19918 7 3,408292 19 4,216250
JUNE 39,14564 0,844094 37,48409 40,80719 8 4,720042 20 4,836375
JULY 40,58321 0,831207 38,94703 42,21940 9 4,014375 21 3,958292
10 3,607375 22 3,618792
AUGUST 45,42871 0,831207 43,79253 47,06490
11 3,049542 23 3,750833
 12 2,626458 24 1,240917 a competitive environment”. IEEE Trans. on Power
TABLE IX: C ONTRAST – DAILY PRICES Systems, Vol 12, No 2. , 1997, pp. 605-613.
Error Gl [2] T. De la Torre, J.W. Feltes, T. G. San Roman, and H. M.
Λ* F Effect G l p Value
0,953527 0,523931 24 258 0,969385 Merrill, “Deregulation, privatization, and competition:
TABLE X: C ONTRAST ESTIMATION- D AILY PRICES Transmission planning under uncertainty,” IEEE
Transactions on Power Systems, Volume: 14, pp. 512–
Hour k
µ (k ) − µ (k )
w th Hour k
µ (k ) − µ (k )
w th
518, May 1999.
($/MWh) ($/MWh)
[3] D. C. Montgomery. Design and Analysis of Experiments,
1 -0,585833 13 -0,168708
2 -0,740667 14 -0,238458 Third Edition Wiley, 1991.
3 -0,515125 15 -0,373083 [4] G. E. P. Box & N. R. Draper. Evolutionary Operation: A
4 -0,525750 16 -0,323042 Statistical Method for Process Improvement, Wiley, 1969.
5 -0,478917 17 -0,191208 [5] D. Moitre, M. Carnero, M. Pontin “Analysis and
6 -0,355125 18 -0,079667 Experimental Design: an application in a wholesale
7 0,045542 19 1,092208 competitive Electric Energy Market”. Proceedings I IEEE
8 -0,009500 20 0,195833
Andean Region International Conference. pp 100-103.
9 0,225750 21 0,369167
10 0,091875 22 0,430000
Venezuela. 1999.
11 0,102458 23 0,375625 [6] D. Moitre, F. Magnago, J. Martinez, M. Galetto
12 -0,038875 24 -0,433250 “Application of an experimental design methodology for
TABLE XI: CONTRAST- MONTHLY PRICE economic parameter analysis in an open market
Error Gl environment”. International Journal of Electric Power
Λ* F Effect G l p Value
Systems Research, Elsevier, U.K. Vol. 73, Issue 1,
0,690456 4,819432 24 258 0,00
TABLE XII: CONTRAST ESTIMATION – MONTHLY PRICES January 2005. pp. 61-66.
[7] S. Deladreue, F. Brouaye, P. Bastard, L. Peligry
Hour k Dec
µ (k ) − µ (k )
Jul Hour k Dec
µ (k ) − µ (k )
Jul
“Application of ANOVA methodology to the
($/MWh) ($/MWh) uncertainties management in Power System planning in
1 6,627714 13 6,969143 an open market environment”. 2001 IEEE Porto Power
2 5,941143 14 7,070429
Tech Conference, 10th – 13th September, Porto, Portugal.
3 5,544000 15 7,089286
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5 5,278143 17 7,275929 two multivariate methods for line congestion study in
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8 5,820071 20 1,317286 353 -358, February 2003.
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12 6,667500 24 7,098786
TABLE XIII: MONTHLY PRICES - CONTRAST
[10] www.cammesa.com.ar
Error Gl
Λ* F Effect G l p Value VIII. BIOGRAPHIES
0,905626 1,120238 24 258 0,321137

TABLE XIV: CONTRAST ESTIMATION- MONTHLY PRICES Diego Moitre (A’97, SM’03) obtained his M. Sc from
Pontificia Universidad Católica, Santiago de Chile. Currently
Hour
k ( )
µ Apr k − µ May k ( ) Hour
k ( )
µ Apr k − µ May (k ) he is associate professor and Dean of the College of
($/MWh) ($/MWh) Engineering, National University of Rio Cuarto. He is also
1 0,169429 13 0,652214 director of the Analysis of Power Systems Group (GASEP)
2 0,231429 14 0,608929
from the same university. His main research activities are
3 0,697286 15 0,563643
4 0,838143 16 0,665143
mathematical modeling and electric market design.
5 0,769000 17 0,360000 Fernando Magnago (SM IEEE) obtained his M. Sc and Ph.D.
6 0,691786 18 0,517500
from Texas A&M University, joined Nexant in 2000, he was
7 -0,213786 19 -1,20157
8 0,730857 20 -0,875357
previously a research engineer at the Institute of Electrical
9 0,904429 21 -0,943857 Power System Protection, Rio Cuarto, Argentina. Currently he
10 1,125429 22 -1,05721 is associate professor at the National University of Rio Cuarto,
11 0,720714 23 -0,997643 and works as software developer for Nexant.
12 0,452643 24 0,774786

VII. REFERENCES

[1] H. Rudnick, R. Varela, W. Hogan “Evaluation of

alternatives for power system coordination and pooling in