  Locational Marginal Price (LMP) is a dual variable associated with
supply-demand matching and represents the cost of delivering power to a
particular location if the load at that location increases. In recent times it
become more volatile due to increased integration of renewables that are
intermittent. The issue of price volatility is further heightened during
periods of grid congestion. Motivated by these problems, we propose a market
design where, by constraining dual variables, we determine the amount of
demand-side flexibility required to limit the rise of LMP. Through our proposed
approach a price requesting load can specify its maximum willingness to pay for
electricity and through demand-side flexibility hedge against price volatility.
For achieving this, an organizational structure for flexibility management is
proposed that exhibits the coordination required between the Distribution
System Operator (DSO), an aggregator and the price requesting load. To
demonstrate the viability of our proposed formulation, we run an illustrative
simulation under infinite and finite line capacities.
