In the competitive electricity market it becomes very much important to give special consideration for development of renewable energy sources (RESs) due to environmental and other social problems related with conventional generations. So this paper presents an optimal model of congestion management with special emphasis for promotion of RES in competitive electricity market. This paper presents a generalized optimal model of congestion management for deregulated power sector that dispatches the pool in combination with privately negotiated bilateral and multilateral contracts while maximizing social benefit. This model determines the locational marginal pricing (LMP) based on marginal cost theory. It also determines the size of non-firm transactions as well as pool demand and generations. Both firms as well as non-firm transactions are considered in this model. The proposed model has been applied to IEEE-30 bus test system with addition of some RES for analysis of the proposed model. The RES supplies its power to load either through the firm transaction or through power pool. The power from RES is not subjected to any curtailment in proposed model of congestion management. (C) 2010 Elsevier Ltd. All rights reserved.