Regulation of supply quality in open electricity markets

This paper addresses power quality (PQ) in view of regulation, i.e. the sets of rules contriving to optimal control of the market. The state of the market depends on: (1) investments; (2) consumers willingness; and (3) quality and price. The goal function is chosen as a net public welfare (W) arising from market transactions. (W) is expected to sway towards maximum by means of regulatory signals radiated whenever PQ fails to comply with elected standards. A linear model of an electricity market is devised, elucidating the main features of its optimal dynamic evolution. In order to illustrate the main points, Brazilian practices on reliability standards are succinctly described.