Managing the risk of performance based rates

A profound consequence of deregulation is the emergence of performance based rates (PBRs). PBRs are contracts that penalize and/or reward a utility based on system performance. These contracts can be based on average system reliability, or can be based on individual customer reliability. In either c...

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Bibliographic Details
Published inIEEE transactions on power systems Vol. 15; no. 2; pp. 893 - 898
Main Authors Brown, R.E., Burke, J.J.
Format Journal Article
LanguageEnglish
Published New York IEEE 01.05.2000
The Institute of Electrical and Electronics Engineers, Inc. (IEEE)
Subjects
Bioreactors
Contracts
Costs
Decisions
Deregulation
Design engineering
Electricity supply industry deregulation
Maintenance
Power industry
Reliability
Risk
Risk management
System performance
System reliability
Uncertainty
Utilities
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Summary:A profound consequence of deregulation is the emergence of performance based rates (PBRs). PBRs are contracts that penalize and/or reward a utility based on system performance. These contracts can be based on average system reliability, or can be based on individual customer reliability. In either case, utilities are exposed to financial risk due to the uncertainty of system reliability. This paper presents a method of assessing the uncertainty of system reliability and discusses how to use this information to manage PBR risk. This method can be used to negotiate a fair PBR, to compute the expected financial impact of a PBR, and to make design decisions that maximize profits while minimizing risk.
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ISSN:0885-8950
1558-0679
DOI:10.1109/59.867190