A reliability based model for electricity pricing

In an attempt to re-regulate the distribution segment of an electric power system, public utility commissions (PUCs) are increasingly adopting a reward/penalty framework in order to guarantee acceptable electric supply reliability. A distribution utility's historical reliability performance records provide the basis for creating practical performance based ratemaking (PBR) mechanisms at the corporate level and identifying substandard areas within a utility's distribution system. The paper presents an application using a graphical methodology for the stratification of a utility's historical reliability indices data base into various categories, i.e., corporate level, regional level and crew level to quickly identify substandard areas for achieving optimum reliability and to develop PBR frameworks for use in a re-regulated environment. A brief analysis of cause contributions to the stratified reliability indices also is presented in this paper. This paper presents actual reliability performance history of a large utility over a period of three years to illustrate how this data can used to develop PBR frameworks for use in a re-regulated environment. The historic reliability based PBR framework developed in this paper will find practical applications in the emerging deregulated electricity market.