Pricing of constraints - the England & Wales experience

Technical Report · Fri Mar 01 04:00:00 EST 1996

OSTI ID:256462

Wibberley, P; Green, A ^[1]

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1. Daneholme House, Daventry (United Kingdom)

The existence, in real-time, of transmission constraints, demand forecasting errors, generator failures, and other factors impose additional costs through the need to run more expensive generation. These costs can appear as a significant component of the wholesale price to demand served by electricity markets operated over transmission networks. In the England & Wales Pool these costs are passed through directly to supply companies. The Transmission System Operator ({open_quotes}TSO{close_quotes}) can exert significant influence on these costs through improved availability of transmission circuits and through appropriate investment, but has no incentive to do so. Since the inception of the Pool, these costs have increased in level and volatility, and have proved difficult to hedge. In response, St Clements Services were instrumental in assisting Pool members to develop an {open_quotes}Uplift Incentive Management Scheme{close_quotes} which has seen controllable {open_quotes}Uplift{close_quote} costs drop from {Brit_pounds}570m to around {Brit_pounds}460m. A refined {open_quotes}Transmission Services Scheme {close_quotes} creates more targeted incentives, but must be designed to avoid creating any incentives which are perverse. Further development of the scheme involves incorporating the incentive mechanism into the TSO`s regulatory price control.

• Research Organization: Electric Power Research Inst., Palo Alto, CA (United States)
• OSTI ID: 256462
• Report Number(s): EPRI-TR--106232; CONF-960330--
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
COMPETITION
COST
ELECTRIC POWER INDUSTRY
POWER POOLING
UNITED KINGDOM