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Emission Costs, Consumer Bypass and Efficient Pricing of Electricity

Chi-Keung Woo, Benjamin Hobbs, Ren Orans, Roger Pupp and Brian Horii

Year: 1994
Volume: Volume15
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol15-No3-3
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Electricity generation causes external costs because of the emission of air pollutants. Pricing an electric utility's service at the sum of the utility's marginal generation cost and marginal emission cost, however, is inefficient due to "bypass" by large industrial customers and the need to maintain the utility's financial viability. This paper derives the optimal tax on emission and efficient prices for retail service to two customer classes, one of which has the option to self-generate. These rules are used to evaluate the pricing proposals made in a recent rate case in California. These proposals are shown to be inefficient, in that they encourage over-consumption by residential customers who do not have access to alternative sources of electricity supply.

Marginal Capacity Costs of Electricity Distribution and Demand for Distributed Generation

Chi-Keung Woo, Debra Lloyd-Zannetti, Ren Orans, Brian Horii and Grayson Heffner

Year: 1995
Volume: Volume16
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol16-No2-6
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Marginal costs of electricity vary by time and location. Past researchers attributed these variations to factors related to electricity generation, transmission and distribution. Past authors, however, did not fully analyze the large variations in marginal distribution capacity costs (MDCC) by area and time. Thus, the objectives of this paper are as follows: (1) to show that large MDCC variations exist within a utility's service territory; (2) to demonstrate inter-utility variations in MDCC; and (3) to demonstrate the usefulness of these costs in determining demand for distributed generation (DG).

Integrated Local Transmission and Distribution Planning Using Customer Outage Costs

Greg Ball, Debra Lloyd-Zannetti, Brian Horii, Dan Birch, Robert E. Ricks, and Holly Lively

Year: 1997
Volume: Volume 18
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol18-NoSI-7
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Changing regulatory incentives in the electric power industry are forcing utility transmission and distribution (T&D) planners to change their approach to investment planning. To minimize the risk of over-investment, utilities need to perform an analysis of system capacity limitations which goes beyond traditional peak load and temperature planning, and routinely consider a variety of alternate incremental capacity expansion measures. Existing engineering tools are inadequate for determining the potential cost advantage of deferring an expansion, or for evaluating the net benefits of distributed resources (DR). Conversely, integrated resource planning (IRP) tools often underestimate or ignore important DR siting restrictions and operational impacts. This paper describes a process to identify T&D capacity constraints, evaluate conventional and alternative capacity additions and DR applications, and explore the risk of operating beyond limits imposed by current reliability practices. The process uses hourly load-flow information to quantify the total annual energy and customer outage costs. The same information is used to build plans incorporating and dispatching DR where they have the greatest impact on minimizing expansion needs. A detailed case study demonstrates the process by quantifying the economic benefits of deferring an expansion with a do-nothing plan. The study reveals both unforeseen advantages and impracticalities of DR use.

Blowing in the Wind: Vanishing Payoffs of a Tolling Agreement for Natural-gas-fired Generation of Electricity in Texas

Chi-Keung Woo, Ira Horowitz, Brian Horii, Ren Orans, and Jay Zarnikau

Year: 2012
Volume: Volume 33
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol33-No1-8
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We use a large Texas database to quantify the effect of rising wind generation on the payoffs of a tolling agreement for natural-gas-fired generation of electricity. We find that while a 20% increase in wind generation may not have a statistically-significant effect, a 40% increase can reduce the agreement's average payoff by 8% to 13%. Since natural-gas-fired generation is necessary for integrating large amounts of intermittent wind energy into an electric grid, our finding contributes to the policy debate of capacity adequacy and system reliability in a restructured electricity market that will see large-scale wind-generation development.Keywords: Wind generation, Tolling agreement, Spark spread option, Investment incentive

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