Pricing ancillary electric power services
The reliability of electric power service depends upon the provision of certain ancillary services. With industry deregulation, the responsibility for providing some of these services should pass from integrated utilities to competing generation firms. FERC`s policies for pricing ancillary services appear, however, to be better designed for an era of cost-plus regulation than for an era of competition. A competitive market will not provide adequate quantities of those goods and services that are underpriced. Unfortunately, the electric power industry has a history of underpricing, or simply not pricing, some of the services that are essential to maintaining the reliability of power systems. Under traditional regulation, this mispricing has not hurt reliability because utilities have been virtually assured that they can recover the costs of these services through the rates they charge for bundled monopoloy retail sales. With competition, however, this mispricing will lead either to degraded power system reliability or to incumbent utilities being forced, by regulators, to inequitably bear costs from which new competitors are free. Ancillary services include reactive power, operating reserves, and frequency control.
- OSTI ID:
- 381318
- Journal Information:
- Electricity Journal, Journal Name: Electricity Journal Journal Issue: 8 Vol. 8; ISSN ELEJE4; ISSN 1040-6190
- Country of Publication:
- United States
- Language:
- English
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