Cost-benefit analysis of power system reliability: two utility case studies

There is an emerging recognition that utility investments and other decisions that affect electric service reliability should be explicitly evaluated on the basis of their cost and benefit implications. A cost-benefit approach that quantifies the reliability benefits of alternatives in terms of the reduction in costs resulting from unserved energy enables the evaluation of generation and transmission capacity additions on a consistent, economic basis. This approach has been applied to two utility case studies. In a case study for Pacific Gas and Electric Company, it was used to evaluate three options for maintaining reliability in a major load center-two involving local generation, and the third, a new 230 kV transmission connection. In a case study for Duke Power Company, the approach was used to evaluate alternative designs for proposed additions to a transmission station. This paper describes the methodology and presents the two utility studies