This paper aims to investigate and model the economic effect of the interruptible load (IL) on the daily energy acquisition of a distribution company (DisCo). In this optimization model, the required energy in the distribution network is supplied using energy purchased from the wholesale power market at the transmission level and locally offered ILs at the distribution level with the applicability on peak load periods. The model is formulated as a bi-level optimization problem in which the upper-level problem seeks to maximize the DisCo profit, and the lower-level problem aims to minimize the cost of the independent system operator (ISO) for increased social welfare. Under these circumstances, DisCo is a price-maker player that can affect the upstream market price and choose the offered ILs directly. IL contracts employment results in a considerable reduction of peak load and cost of DisCo. Furthermore, it is observed that utilizing IL contracts cause a remarkable reduction in locational marginal price (LMP), which indicates even employing more expensive ILs is economical. Besides, the proposed method provides a powerful tool for comparison between different rules for accepting or rejecting the IL contracts by DisCo at the distribution level or by ISO in the wholesale market.

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