Reliability Pricing Using Contingent Contracts

The electric power market is restructuring to be price-based and auctions are considered a good pricing mechanism to be used. To assure that the market functions satisfactorily, strictness of guarantee of sellers´ deliveries and buyers´ receipts must be taken care properly by the central coordinator. This paper proposes market mechanisms for single-class auctions, which specifies the minimum strictness of guarantee of the power that buyers bought via two quantities: availability and expected energy served. Sellers are required to specify only the availability of sold power to indicate its strictness of guarantee. Apart from power bids, the proposed market mechanism allows an additional type of bids, contingency bids, which are bids for remedial actions. Remedial actions are needed in case of contingencies so that power can be delivered from sellers to buyers promptly according to the contracts. This methodology was adopted and implemented as part of wholesale market tariffs at Commonwealth Edison since 1996. Commonwealth Edison adopted this methodology by expanding the PTI PSS/E package to automate this process and by including the methodology as part of the interchange tariff. That implementation used the internal costs of services by Commonwealth Edison for the contingent contracts. This work extends that implementation to use the price of service by competitive bids.