Abstract--The design of wholesale electricity markets through deregulation has focused almost exclusively on the development of competitive supply (generation). The demand side of the market has been virtually ignored. Mostly, this is due to the assumption that electricity demand is almost completely inelastic. As a result, deregulated wholesale markets universally fail to pass price signals down to the end-users. This paper challenges the assumption of inelastic demand by exploring the potential benefits of implementing a simple load control scheme. This load control scheme allows consumers to shift demand from high priced hours to low priced hours during the day. The benefits to the individual consumer are explored through an example applied to residential air conditioning using price and demand data from California. This example shows that "smart" use of air conditioning can lead to great savings for residential consumers, without sacrificing comfort. The potential for multiple consumers implementing load control to reduce wholesale prices is also examined.
In this paper, we examine the interplay of regulatory structures and the use of technology on the electricity distribution grid. The emphasis is on the incentives provided by regulation for efficient investment in capital and technology. Several regulatory structures are examined to determine their relative affects on investments in technologies, especially new technologies that can improve efficiency. These affects are measured in terms of the effects on the co sts of delivery and the reliability seen by the consumers. Both Rate of Return and Performance Based Regulation with penalties for reliability failures are assessed for their relative strengths and weaknesses. As a result of this analysis, we find a need for a regulatory structure that provides incentives for both cost efficiency and quality of service. As a result, we propose an insurance scheme for reliability service under performance based regulation for delivery service. Implementing insurance for r eliability will allow consumers to provide economic signals to the distribution provider. These signals enable the distribution provider to make economically efficient investment decisions for both capital and technology. The insurance also allocates the risk of outages to the distribution provider (who has control of the system), rather than to the consumer (as it is now). The implementation of reliability insurance also provides a relatively simple method for unbundling the delivery and reliability services and enables consumers to receive differentiated reliability service based upon their value for this service. This paper elaborates upon the proposed reliability insurance scheme and shows how it improves overall social welfare
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