In the operation of a deregulated power system, congestion and power loss are the two major factors causing price fluctuation in different parts of the network. In this paper, a new method is proposed for calculating and investing the congestion surplus. In this method, congestion surplus, which is calculated on the basis of flow‐gate marginal prices, is used as an economic signal to control the network. In this regard, different strategies such as the definition of sensitive buses and priority list of the congested lines are proposed from the perspective of flow‐gate marginal price concept. In order to verify the novel reformation, distributed generation planning is presented as an illustrative example. In this approach, proper investment is applied to increase the social welfare under new formulation in the presence of distributed generation resources. The proposed algorithm is implemented on IEEE 30‐bus and IEEE 57‐bus networks. The results emphasize the accuracy and efficiency of the proposed algorithm for calculating the congestion surplus and increasing social welfare with the least amount of investment.
