On the fundamental importance of relating operating and planning objectives in the changing electric power industry

In this paper we emphasize the fundamental importance of relating the short-term efficiencies in utilizing the existing equipment to the capital cost of candidate new investments. We suggest that the systematic assessment of candidate investments based on understanding the break-even cumulative short-term system performance with the capital cost of the investments is the key to selecting the investments which enhance system-wide utilization of the existing and the new resources. The two-part tariff underlying guaranteed revenue recovery is compared with the peak-load-pricing-based approach in both the regulated and the deregulated industry. We point out that the economic policy regulation is needed to give incentives for near-optimal investments.