Allocating the Costs of Contingency Reserves

The current method of charging transmission customers on the basis of energy production or consumption has nothing to do with cost causation and is therefore inequitable and economically inefficient. The authors propose a two-part method for assigning the contingency-reserves costs. The first part would be a function of the number and size of forced outages that required the use of contingency reserves. The second would be a function of the largest single contingency each hour.