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Priority Pricing of Interruptible Electric Service with an Early Notification Option

Todd Strauss and Shmuel Oren

Year: 1993
Volume: Volume 14
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol14-No2-9
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Priority pricing of interruptible electric service induces each customer to self select a rationing priority that matches the rank order of its interruption loss. This paper extends the theory by considering the possibility of early notification, an option offered by many electric utilities. The proposed tariff structure allows a customer to choose either early notification and pay a fixed fee, or select no advance notification along with a level of compensation when interrupted. The chosen compensation determines customer service priority and corresponding price. Service priority is interpreted as an externality component of the marginal cost of system shortfall.

Transition to Centralized Unit Commitment An Econometric Analysis of Colombia’s Experience

Álvaro Riascos, Miguel Bernal, Luciano de Castro and Shmuel Oren

Year: 2016
Volume: Volume 37
Number: Number 3
DOI: 10.5547/01956574.37.3.aria
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This paper attempts to shed light on the relative merits of centralized electricity markets with multipart bids and dispatch using an MIP-based unit commitment optimization approach vs. self-committed markets with linear energy supply curves. We conduct an empirical study of data from the Colombian market, which in 2009 transitioned from a self-commitment paradigm to a centralized unit commitment approach where generators offer a linear supply function for energy along with start-up costs while the commitment and dispatch are determined by the system operator using MIP-based optimization. The results indicate that the transition to centralized dispatch has resulted in productive efficiency gains through a decrease in production costs. However, these gains have not translated into wholesale price decreases; in fact, wholesale prices increased after the change in the dispatch approach. These results suggest that productive efficiency gains have been captured by suppliers through the exercise of market power.

A Mechanism for Allocating Benefits and Costs from Transmission Interconnections under Cooperation: A Case Study of the North Sea Offshore Grid

Martin Kristiansen, Francisco D. Muñoz, Shmuel Oren, and Magnus Korpås

Year: 2018
Volume: Volume 39
Number: Number 6
DOI: 10.5547/01956574.39.6.mkri
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We propose a generic mechanism for allocating the benefits and costs that result from the development of international transmission interconnections under a cooperative agreement. The mechanism is based on a planning model that considers generation investments as a response to transmission developments, and the Shapley Value from cooperative game theory. This method provides a unique allocation of benefits and costs considering each country's average incremental contribution to the cooperative agreement. The allocation satisfies an axiomatic definition of fairness. We demonstrate our results for three planned transmission interconnections in the North Sea and show that the proposed mechanism can be used as a basis for defining a set of Power Purchase Agreements among countries. This achieves the desired final distribution of economic benefits and costs from transmission interconnections as countries trade power over time. We also show that, in this case, the proposed allocation is stable.

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