Managing the risk of performance based rates

Author

Brown, Richard E. ; Burke, James J.

Author_Institution

ABB Electr. Syst. Technol. Inst., Rayleigh, NC, USA

Volume

15

Issue

2

fYear

2000

fDate

5/1/2000 12:00:00 AM

Firstpage

893

Lastpage

898

Abstract

A profound consequence of deregulation is the emergence of performance based rates (PBRs). PBRs are contracts that penalize and/or reward a utility based on system performance. These contracts can be based on average system reliability, or can be based on individual customer reliability. In either case, utilities are exposed to financial risk due to the uncertainty of system reliability. This paper presents a method of assessing the uncertainty of system reliability and discusses how to use this information to manage PBR risk. This method can be used to negotiate a fair PBR, to compute the expected financial impact of a PBR, and to make design decisions that maximize profits while minimizing risk

Keywords

contracts; electricity supply industry; power system economics; power system reliability; risk management; average system reliability; deregulation; expected financial impact; financial risk; individual customer reliability; performance based rates; power system reliability uncertainty; risk management; Bioreactors; Contracts; Costs; Electricity supply industry deregulation; Maintenance; Power industry; Reliability; Risk management; System performance; Uncertainty;

fLanguage

English

Journal_Title

Power Systems, IEEE Transactions on

Publisher

ieee

ISSN

0885-8950

Type

jour

DOI

10.1109/59.867190

Filename

867190