The reliability at a price concept [power supply reliability]

The real gains from restructuring the electricity industry will not materialize until the system operation paradigm will shift from an "obligation to serve" to an "obligation to serve at a price". Under such a paradigm shift reliability will become more of a private good then a public good with customers being able to choose and control the tradeoff between their cost and the service quality they get in the same way they make such tradeoffs in transportation services, telecommunication etc. Such a transformation cannot occur overnight. It requires massive deployment of metering, communication, computation and control technologies. However, with the rapid decline in the cost of IT and the impediments to expansion of generation and transmission capacity, empowering customers to make their tradeoffs between reliability and cost is definitely in the cards. In order to make electric service reliability more of a private good it is necessary to provide correct price signal that reflect locational and temporal cost and enable customer response to these prices through direct load response or through the choice of service level contracts. From the operators point of view it is necessary to develop means of providing differential reliability to customers and employ load response in lieu of ancillary services in order to protect the system from collapse. The paradigm shift is described by the following examples: market based generation adequacy; price-triggered rotating outages; establishing a demand function for ancillary services; and incorporating price based spinning reserves into unit commitment.