Guidelines for inter-utility energy exchange agreements

Complete flexibility in the exchange of energy between electrical utilities within a defined geographic region has many advantages. These include (a) savings in fuel by maximizing the utilization of hydro-electric capability through the integrated operation of thermal-electric and hydro-electric components, (b) minimization of capital investment by providing capacity expansion to meet load growth using the overall optimum sequence of new source development, (c) reduction of capacity requirements through diversity in the time of peak load between electrical utilities, (d) improvements in system reliability, (e) gains in overall capability due to hydrological diversity in hydro-electric components of the joint system. It can be accepted that, within the defined geographic region, the cost of meeting electrical demand can be minimized by the optimization of operation and capacity expansion of the electrical supply system. However, the achievement of this goal is severely hampered by the existence of several autonomous electrical utilities within the defined region. The geographic boundaries of these utilities are politically constrained and are generally unrelated to either location of electrical demand centres or electrical energy sources. As a result formulae developed to achieve an equitable distribution of costs and benefits between electric utilities are complex. The factors involved in establishing such formulae on the basis of optimum regional operation and capacity expansion are presented. The requirements and difficulties involved in reaching satisfactory inter utility agreements are discussed, and basic approaches to formulation of agreements are presented.