IEEE Transactions on Power Systems, Vo1.6, No.

1, February 1991

23

REAL-TIME PRICING OF REACTIVE POWER: THEORY AND CASE STUDY RESULTS by Martin L. Baughman Shams N.Siddiqi Senior Member Student Member Professor Graduate Research Assistant Department of Electrical and Computer Engineering The University of Texas at Austin Austin, Texas 78712

ABSTRACT An analysis is made of real-time pricing policies of reactive power using a modification of the OPF model. The theory of realtime pricing of reactive power is presented, followed by a case study illustrating the magnitudes and ranges that real-time prices of reactive power might take on under different circumstances. The efficiency implications of real-time pricing of reactive power are compared with traditional power factor penalties. It is concluded that real-time pricing of reactive power should develop simultaneously with that of active power for maximum economic efficiency and smooth operation of the electricity marketplace.

KEY WORDS ; Reactive Power, Real-Time Pricing, Optimal Power Flow

I INTRODUCTION
Real-time pricing of electrical energy is an area of intense research at present. Real-time pricing of reactive power is closely related to that of active (orreal) power. The development of spot pricing theory and the analysis of the practice of spot pricing for real power have been carried out by Caramanis, Bohn and Schweppe [1],[2], among others. Schweppe, et. al. [3] see spot pricing becoming more attractive in a competitive electricity market, especially at the generation stage where independent power producers would adjust their generation levels according to the spot prices paid to the producers for their power production. An extensive discussion on the implementation and functioning of a spot price based energy marketplace is made in [4]. It includes topics ranging from spot price based rates and revenue reconciliation to optimal investment conditions. a summary of existing rates that are related to real-time prices and load management schemes that reflect real-time pricing policies is provided in [5]. A utility perspective on spot pricing is given in [6]. Most discussions on spot pricing of real power are equally relevant to real-time pricing of reactive power. Unfortunately, the pricing of reactive power has received very little attention. A reason for this negligence is the inherent difficulty in understanding the concept, especially by economists. Berg, et. al. [7] point out the inconsistency and inadequacy of the present pricing policies based on power factor penalties. They suggest that, given the present high cost of additional investments by electric utilities, prices should be derived from economic principles, which support a pricing approach that has price equal marginal costs, that would also reflect today's technological constraints. As power system margins are reduced because of emphasis on the greater use of generation and transmission, power systems dispatchersmust operate their systems much closer to their technical limits. Real-time prices for reactive power provide information to both users and dispatchers of electricity about the cost and value of reactive power usage, flows, and sources.
90 S 466-3 P R M WS A paper recommended and approved by t h e IEEE Power System Engineering Committee of the IEEE Power Engineering Society for presentation a t the IEEE/PES 1990 Summer Meeting, Minneapolis, Minnesota, J u l y 15-19, 1990. Manuscript submitted February 1, 1990; made available f o r p r i n t i n g April 24, 1990.

Ray and Alvarado [8] use a modification of the Optimal Power Flow (OPF) model which allows for the price responsiveness of real power demand to analyze the effects of spot pricing policies. A similar model, but one which also allows for the price responsiveness of reactive power demand, will be used here to reactive power. analyze the impact of real-time pricing of real In this paper, an analysis is made of real-time pricing of reactive power using a modification of the OPF model. In the next section the theory of real-time pricing of reactive power is presented. In Section 111, a case study illustrating the magnitudes and ranges that real-time prices of reactive power might take on under different circumstances is presented. The next section then discusses the efficiency implications of real-time pricing of reactive power when compared with traditional power factor penalties. The last section concludes that real-time pricing of reactive power should develop simultaneously with that of active power for maximum economic efficiency and smooth operation of the electricity marketplace.

II. THEORY OF REAL-TIME PRICING OF REAC'I?VE POWER

A theory of real-time pricing of reactive power that accurately reflects the underlying physical and engineering properties of electricity is presented below. i l The following notation w l be used in the derivation: C = total system operating cost Ci(.)= cost function of generating plant at Bus i Pgi = active power generation at Bus i Qgi = reactive power generation at Bus i Pdi = active power demand at Bus i Qdi = reactive power demand at Bus i Vi = voltage at Bus i 6i = voltage angle at Bus i YBUS= [Yij] = admittance matrix of the transmission network. 8ij = phase angle of Yij Pi, = active power flow from Bus i to Bus j N = set of all buses in the system G = set of all buses having generating capacity MCpi= Lagrange multiplier on the active power equation at Bus i M Q = Lagrange multiplier on the reactive power equation at Bus i & , i n = Lagrange multiplier on the minimum active power generation limit at Bus i hi,m= = Lagrange multiplier on the maximum active power generation limit at Bus i pi,min= Lagrange multiplier on the minimum reactive power generation at Bus i pi,"=Lagrange multiplier on the maximum reactive power generation at Bus i qi, = Lagrange multiplier on the active power flow limit from Bus i to Bus j Vimh= Lagrange multiplier on the minimum voltage level at Bus i Vim== Lagrange multiplier on the maximumvoltage level at Bus i Epi = price elasticity of demand of active power at Bus i Q = price elasticity of demand of reactive power at Bus i Epqi = cross-price elasticity of demand for active power with respect to a change in price of reactive power at Bus i Espi = cross-price elasticity of demand for reactive power with respect to a change in price of active power at Bus i Dpi = demand for active power at Bus i for active power and reactive power prices equal to unity Dqj = demand for reactive power at Bus i for active power and reactive power prices equal to unity.

0885-8950/91/0200-0023$01.000 1991 E E E

24

It is assumed that a single welfare-maximizingpublic utility owns and operates the generating plants and transmission network of the electric power system under consideration and it sells active and reactive power to independent customers. The utility is assumed to be able to set and communicate prices instantly, and can set a different price for each customer location at each moment. The customer responses to these prices are assumed to be known and are given by the demand functions. It is also assumed that demands are independent of past and future prices and, correspondingly, for generating costs. Therefore, the model can be solved as a single period model. Objective: The objective of the pricing policy is to maximize social welfare, that is, to maximize consumers' plus producers' surplus, subject to the operational constraints. This is accomplished by setting prices of real and reactive power at each bus at a particular time equal to the marginal costs of supplying real and reactive power, respectively, at that bus and that time, where the marginal costs are determined on the basis of an optimal load dispatch, that is, real and reactive power dispatch so as to minimize total operating costs of the utility, subject to the operational constraints.The pattern of optimal load dispatch is dependent on the real and reactive power demands, and, on the other hand, real and reactive power demands are dependent on the prices, that is, marginal costs determined from the optimal load dispatch. Thus, this is a bi-level problem consisting of an upper and a lower part. The upper level problem is that of satisfying the demand functions, where the prices are implicitly determined by the lower level problem, which is that of minimizing total operating costs subject to the operational constraints. Demand Functions: The demand functions are assumed to be of log-linear form exhibiting constant price elasticity and cross-price elasticity.The demand functions may be mathematically expressed in the following equation forms: Pd;= Dpi ( MCp;)Epi( MCqi)Ep9'
(1)

Qg;

- Qdi +

c
jeN

IVi I IV, lYij Sin( Bij+6,-6i ) = 0

(5)

which are the active and eaci ve power flow equations, respectively, for all i E N. The Lagrange multipliers of the above constraints, M Q i and MCqi respectively, give the marginal costs of supplying real and reactive power at Bus i and thus determine the prices of real and reactive power, respectively, at that bus. Generation Limits: The generating plants of the utility have a maximum generating capacity, above which it is not feasible to generate due to technical or economic reasons. Generation limits are important in determining the operating points and marginal costs of generation. Generating limits are usually expressed as maximum and minimum active power and reactive power outputs, Pgi,min I Pgi I Pgi,max (6) Qgi,max 5 Qgi I Qgi,max (7) where Pgi,min and Pgi,max are the minimum and maximum active power output and Qgi,min and Qgi,max are the minimum and maximum reactive power output, respectively, of the generating plant at Bus i, for all i E G. If the plant at Bus i has only reactive power generating capability, for example, capacitor banks or synchronous condensers, then Pgi min = 0, Pgi,max = 0, Qgi,min = 0,and the set of constraints effectivkly reduce to 0 2 Qgi I Qgi,max . (8) Transmission Limits: Transmission limits refer to the maximum power or current that a given transmission line is capable of transmitting under given conditions. These limits can be based on thermal considerations or on stability considerations. Thermal limits usually dominate for iis shorter lines. Dynamic stability lmt dominate longer line behavior. These limits affect the marginal costs of operation. Transmission limits are expressed here in terms of the maximum active power flow through the lines, (9) Pij,min 5 Pij 5 Pij,max where Pij = IVi I IVj I IYi, I COS(8ij+6,-6i ) - IVi l2 IYij I Coseij, assuming that shunt admittance is negligible, where Pij,min and Pij,max are the minimum and maximum active power flow, respectlvely, through the line connecting Bus i to Bus j ,for i # j, and all i, j E N . Voltage Limits: Voltage limits refer to the requirement for the system bus voltages to remain within a narrow range of levels. Since voltages are affected primarily by reactive power flows, the marginal cost of supplying reactive power to a bus is directly dependent in the voltage level requirement at that bus. The voltage limits can be expressed by the following constraints, (10) Vi,min I IViI I V i D a where Vi,min and Vi," are the minimum and maximum voltage levels, respectively, that are acceptable at Bus i, for all i E N. Model Solution: A method of solution for the bi-level nonlinear programming problem is presented below. The Lagrangian to be minimized over all active power generation levels Pg, reactive power generation levels Qg, voltage levels V, and voltage angles 6, is: L ( Pg, Qg, V, 6 ) =

wi= %i (MQi)E4ph(MCqi)'1 (2) which give the demand of real and reactive power at Bus i as a function of prices of real and reactive power at that bus, for all i E N. The parameters of the equations, which are Dpi, Dqi, Epi, Eqi,. Epqi, and Ewi, vary with customer classes, time under consideration, and other exogenous factors. For example, they may differ for residential and commercial customers, the time of day, the season, weather conditions, etc. The prices of real and reactive power, which are equal to marginal costs MCpi and MCqi, respectively, when load is dispatched optimally, are implicitly defined by the following lower level problem.

Lower-levelObjective Function: The lower level problem is basically the optimal power flow problem which has the objective of minimizing the total cost of operating the spatially separated generating units subject to the set of equations that characterize the flow of power throughout the system and all operational constraints. Since the operating cost of producing reactive power is much less than that of real power where the capacity exists, the operating cost of generating reactive power is assumed to be negligible compared to that of real power in the analysis to follow. Thus, the objective function may be expressed in the following form: Minimize C = Ci ( Pgi) (3) where C ( Pgi ) is the operating cost of producing Pgi units of real i power at the generatingplant at Bus i. There are several constraints to the lower level problem. Load Flow Equations: The set of equations, determined by Kirchoffs laws, that characterize the flow of power throughout the system are given below: Pgi - Pdi IVi I IVj I 1YijI COS( 8iJ+6j-6i ) = 0 (4)
ieG

c
i E G

Ci(Pgi)
[ operating costs I ( M Q i ) [Pgi - Pdi N~INjITY~~ICos(8i$6J-6i)]
N
'

iE

jeN

[ active power flow equations ]

j E N

25

i EN

( M C ~i ~

ai- wi +
jEN

I V I wj I ~

wijI Sin( eij+6j--6i I

[ reactive power flow equations ]

-

C
ieG

hi,min(pgi-Pgi,min)
[ min. active power generation limit ] hi,max ( Pgi- Pgi,max) [ max. active power generation limit ]

C
iEG

iEG

Fi,min ( Qgi - Qi,min) [min. reactive power generation limit ]

Wi,max

C iEG
C
iEN

( Qi - Qi,max)

[max.reactive power generation limit]

qij ( lpijl- Pij,max)

iEN JEN

c 'f
C
iEN

Generating Unit

- e m

Itransmission line constraints 1

I - Vi,min)
[ minimum voltage levels ]
I - Vi,max)

Figure 1 The Four-bus Test Power System Model Formulation: The modified OPF model used to solve the bi-level problem can be formulated as the optimization problem of minimizing the total cost of operating the spatially separated generating units subject to the load flow equations that characterize the flow of real and reactive power throughout the system, the operational constraints such as generation limits, transmission limits and voltage limits, and the demand functions for real and reactive power at every bus. The formulation of the model is described below. ObjectiveFunction: Minimize C = C1( Pgl ) + C2 ( Pg2 ) = 33251+1622 Pg1+169.5 Pg12+ 2098.9 Pg2+ 441.9 Pg22 Load Flow Equations:
4

Vi,min (

Vi,max (

[ maximum voltage levels ] (11) with the additional condition that the demand functions must be satisfied, that is, Pdi= Dpi ( M C P ~ ) ~ " ( MCqi)ER' (12)

(13) Qdi= mi (MCPi)Egp'(MCqi)'g' for all i E N. The Kuhn-Tucker conditions for the minimization problem along with the demand functions can be solved simultaneously to obtain the real-time prices of active and reactive power at each bus that maximizes overall social welfare along with the generation, demand, voltage magnitude and angle at each bus and the power flow in each line. Definition of Real-time Prices: The real-time price of real power based on marginal cost at Bus i and at a particular time is given by, pi = - [ total cost of providing electricity to all customers subject 6Pd to the operational constraints ]
- - 6L -

Pgi - Pdi - ~ N i I N j I N i , i C ~ ~ ( 8 i j + 6 j = 6 0 ) - i
j=l

ai- ai+ C N , I N ~ I N ~ ~ I =S o~ ~ ( ~ ~ , + ~ , - ~
j=1

6Pd
= MCpi

Similarly, the real-time price of reactive power based on marginal cost at Bus i and at a particular time is given by: 6 q, = - [ total cost of providing electricity to all customers subject SQdi to the operational constraints ] 6L --

for i = 1,2,3,4. Generation Limits: 0.0 I Pgl I 6.3 0.0 5 Pg2 I 2.0 -1.0 I Qgl I 3.5 -0.8 I Qg2 S 3.0 -0.05 I Qg3 2 0.2 Transmission Limits: Pij I 1.8 for all i = 1,2,3,4, j = 1,2,3,4 and i # j. Voltage Limits: I v1 I = 1.0 I v2 I = 1.0 0.95 I I V3 I I 1.05 0.95 I I V41 2 1.05 Demand Functions: Pd, = Dpl ( MCpl)-0'2(MCql)o'a
Y

"~ Pd2 = Dp2 ( M Q J ~ ) - ( MCq2)O.O

Pd3 = D P 3 ( MCP3 MCq3 1 Pd4 = Dp4 ( MCp4)-'.05 ( MCq4 )-0'04
-0.0001

6Qdi = MCqi
111. CASE STUDY

A simple, four-bus test power system, shown in Fig.1, is used to gain insights into the effects of real-time pricing.The buses are interconnected by high voltage transmission lines. At buses 1 and 2, there are utility-controlled generating plants. The two generating units each have a unique operating cost function derived from data on fuel costs of the generating units. A controllable reactive power source is available at Bus 3. Customer loads exist at every bus and each load is assumed to be price sensitive and expressible by demand functions for active power and reactive power that have constant price elasticity and cross-price elasticity. The units of all quantities are given in per unit on a basis of 100 MVA and 138 kV. Voltage angles are in radians.

Qd,

Dql ( MCpl )-o.2(MCql

Qd2 =

D q 2 ( MCp2

( MCq2 )O"

Qd3 = Dq3 ( MCp3 ) - 0 ' 0 5 ( MCq3 Qd4 = Dq4 ( MCp4 )-0.02 ( MCq4 )-O'l where Dpi and Dqi vary with time of use and are determined from load curves. The values at the time of system peak are: Dpl = 5.677 Dql = 2.962 Dq2 = 0.667 Dp2 = 1.444 Dp3 = 1.889 Dq3 = 0.8175 Dp4 = 1.184 Dq4 = 0.6434

26

Results: The model formulated in the previous section was solved on the CDC Dual Cyber 170/750 using GRG2 [9], a program which solves nonlinear programming problems using generalized reduced gradient methods. The results obtained from the analysis are presented below. Behavior of Real-time Prices: The variations of real-time prices of active and reactive power at Bus 3 for a 24 hour period are shown in Figs. 2 and 3 for customer demands under flat-rate pricing as well as customer demands which are price responsive under real-time pricing. Realtime price trajectories are closely related to demand, except that the percentage change in prices is greater than the corresponding percentage change in demand. Effect of Operational Constraints: The effect of operational constraints on the utility and its customers under real-time pricing is studied by observing the impact of varying a single constraint while keeping the rest of the constraints fixed. The observed effects at the time of system peak are described below. (a) Generation limits: In general, the most economically efficient generating units are used to supply the base load, generating units of lesser efficiency to supply the intermediate load, and the most inefficient units to meet peak load. Thus, with the increase of load,as more inefficient units are operated to supply the demand, the marginal cost and hence the real-time price of real power increases due to the introduction of inefficient units as well as due to the increase in losses. Taking the partial derivative of equation (1 1) with respect to Pgi and Qgi, we get, = L [ C i (Pgi)] - MCp;- hi,m;l+ hisnax (14) spgi spgi
= - MCg -

Flat-rates

12 Hours

18

24

Fig.3 Variations of Real-time Price of Reactive Power at Bus 3 for a 24 Hour Period Thus, at a generating bus, the price of active power is equal to the marginal cost of production and the price of reactive power is zem until the generatingcapacity limits are reached. Figures 4 and 5 show the effects of decreasing the generating capacity of the generating unit at Bus 1 under real-time pricing of active and reactive power.

p, i-

+ pisnax

(15)

6Qgi Since the function L is minimized with respect to Pgi and

w,

ii

"1
0

Bus1 Bus2

(18)
50

MCqi = - Pi,min + Pi,max

36

(19)
h

100 150 Power G n r t o at Bus 1 eeain

200

+ Real-time rates

Flat-rates

Fig.4 Real-time Price of Active Power vs.Power Generation at Bus1

Bus3

+ Bus4

50 100 150 Power Generationat BUB (MW) 1

200

Fig.5 Real-time Price of Reactive Power vs. Power Generation at Bus 1

0

12
Hours

18

24

Fig.2 Variations of Real-time Price of Active Power at Bus 3 for a 24 Hour Period

A reduction of reactive power generating capacity at Bus 3 has a much greater affect on real-time prices of reactive power, especially at Bus 3, than on the real-time prices of active power. The effects of tightening the constraint on reactive power generation capacity B~~ 3tatslli at d aTe eru in figures6 through 1

27

Figures 6 and 7 show the effects of decreasing the reactive generating capacity of the generating unit at Bus 3 on the real-time prices of active and reactive power. Figures 8.9, and 10 show the effects on active power de,mand. reactive power demand, and the revenue, costs and profits of the utility, respectively. Figure 11 shows that the revenue, and hence profit, of the reactive power generating plant alone initially increases due to increasing prices but then falls as the quantity produced is reduced more than the corresponding rise in prices. (b) Transmission Limits: Transmission limits affect real-time prices of reactive power much in the same way as it does real power prices. When the power flow constraint on a line is made increasingly tight, the prices of real and reactive power on the receiving end of the line also increase. This is because the line flow constraint forces the use of a higher loss path to satisfy the demand requirements of the bus at the receiving end of the line, and may also require the reallocation of oa generation which would increase t t l operating costs. (c) Voltage limit: The greatest impact on the real-time prices of reactive power as well as the generation and consumptionpattem of reactive power by the utility and customers is due to voltage constraints. This is because voltages are affected mainly by reactive power flows and voltage constraints are usually relieved by adding sources of reactive power.
Busl Bus2 9 Bus3 + Bus4
+ b

-0.0

-0.2

-0.4

+
-0.6

Busl

Bus2
Bus3 Bus4

-0.8

I
0

10

20

30

40

Reactive Power Generationat Bus 3 (MVAR)

Fig.8 Change in Active Power Demand vs. Reactive Power Generation a Bus 3 t

cz

321+ 31: 0

.
10

d
I

4 -' -5

20

30

40

t
0

Busl Bus2 9 Bus3 + Bus4

0

+-

I
10 20

30

40

Reactive Power Generationat Bus 3

Reactive Power Generationat Bus 3 (MVAR)

Fig.6 Real-time Price of Active Power vs.Reactive Power Generation at Bus 3

1
0.8

Fig9 Change in Reactive Power Demand vs. Reactive Power Generation at Bus 3

P,

Bus3 Bus4

+
4

Profit cost Rev.

0.6

cz

0.4

,0.2+
0

10

20

30

40

-lo!
0

10

20

30

40

Reactive Power O n r t o at Bus 3 (MVAR) eeain

Reactive Power G n r t o at Bus 3 (MVAR) eeain

Fig.7 Real-time Price of Reactive Power vs. Reactive Power Generation at Bus 3

Fig. 10 Change in Revenue, Cost, and Profit vs. Reactive Power Generation at Bus 3

28

The effect of tightening the voltage constraint at Bus 4 under real-time pricing of active and reactive power are shown in Figures 12 and 13. Figure 12 shows that the real-time price of active power rises at Bus 4 and changes very little at other buses with the increasingly tight constraint on Bus 4 voltage. On the other hand, the real-time price of reactive power at Bus 4 rises very rapidly with the tightening of the constraint, as shown in Figure 13. Without real-time pricing of reactive power and the corresponding price responsiveness of reactive power demand, the tightening of the voltage constraint at Bus 4 could lead to skyrocketing costs of supplying reactive power to Bus 4 and consequent load intemption in order to maintain the desired voltage level. IV. COMPARISON WITH POWER F A O R PENALTIES Reactive power pricing based on power factor penalties is unable to provide accurate price signals to customers under voltage constraints. In the case in question, the marginal cost of reactive power at Bus 4 is $693.52 per MVARHr when the voltage limit is 0.966 PA., but the price of reactive power would be zero under power factor penalties since the power factor of the customer at Bus 4 is greater than 85 percent. Under real-time pricing of reactive power, the price of reactive power at Bus 4 would be $693.52 per MVARHr, equal to the marginal cost. Such a high price would provide a strong incentive for the customer to reduce reactive power demand.Thus, power factor penalties are unable to give accurate price signals to customers, while real-time prices provide such signals. Consider the case of two customers connected to Bus 4, one large customer having a demand of 200 MW and 113 MVAR and another smaller customer having a demand of 20 MW and 19 MVAR at the time of system peak, when the marginal cost of reactive power is $0.56 per MVARHr at Bus 4. In order to calculate the bill for reactive power consumption under power factor penalty, the following billing algorithm is used for customers having power factors below 85 percent: The total KWh for the month is multiplied by 85 percent and divided by the average power factor for that month for adjustment purpose. Under this penalty policy, the larger customer who demands 113 MVAR of reactive power will not be penalized, that is. his monthly bill for real power consumption-will not increase due to his reactive power consumption since the cugtomer's power factor is greater than 85 percent, namely 87 percent. On the other hand, the smaller customer would be penalized for his demand of 19 MVAR and, if a load factor of one is assumed, the customer's monthly bill would be 1.1724 times his bill for real power consumption alone. This represents an increase in the monthly bill of 17.24 percent for the smaller customer, while the larger customer's bill does not increase. The smaller customer effectively pays $7.26 per MVARHr while the larger customer pays $0.00 per MVARHr, even though the larger customer is the major consumer of reactive power. Thus, the cost burden is inequitably shared by the customers under reactive power pricing based on power factor penalties. Under real-time pricing of reactive power, both customers would pay the same real-time price of $0.56 per MVARHr. Thus, each customer would pay in the exact proportion as the amount of reactive power consumed by each, which results in an equitable sharing of the cost burden. The cost imposed on a utility due to the reactive power demand at a bus depends on the amount of reactive power consumed and not on the power factors of the individual customers. Hence, reactive power pricing based on power factor penalties does not result in equitable sharing of the cost burdens while real-time pricing of reactive power based on marginal costs does result in equitable sharing of cost burdens.

5 1

-15
0

10

20

30

40

Reactive Powa Generationat Bus 3 (MVAR)

Fig. 11 Change in Revenue from VAR Sales at Bus 3 vs. Reactive Power Generation at Bus 3
3oo

100

0
0.90 0.92 0.94 0.96

1
0.98

Voltage at Bus 4 @er unit)

Fig.12 Real-time Price of Active.Powervs. Voltage at Bus 4 M O1

3 F
d

V. CONCLUSION The importance of an efficient reactive power pricing policy is beginning to be recognized by the utility industry. Accurate price signals are essential for proper investment planning by the utility and the customers so as to maximize overall social welfare. Real-time pricing of active and reactive power are necessary ingredients for a successful marketplace of electricity. Such a market would treat VARs like other market "mcdities, thus providing a market mechanism for buving and selling VARs. This would facilitate marketplace transactions of reactive power including buying and selling of VARs to neighboring utilities, large industries and independent power producers as well as to cletermine wheeling charges for VARs.

f
-200 0.90 0.92 0.94 0.96 0.98 Voltage at Bus 4 @er unit)

Fig. 13 Real-time Price of Reactive Power at Bus 4 vs. Voltage at Bus 4

29

APPENDIX: TRANSMISSION LINE IMPEDGNCE DATA Line, Length bus to bus km mi R X R X perunit perunit Charging MVAR

1-2 1-4 2-3 2-4 3-4

64.4 48.3 48.3 128.7 80.5

40 30 30 80 50

8 6 6 16 10

32 24 24 64 40

0.042 0.031 0.031 0.084 0.053

0.168 0.126 0.126 0.336 0.210

4.1 3.1 3.1 8.2 5.1

REFERENCES
1) Caramanis, M. C., R. E. Bohn, and F. C. Schweppe, "Spot Pricing of Electricity: Practice and Theory", IEEE Transactions on Power Apparatus and Systems, Vol. PAS-101, No. 9, September 1982, pp. 3234 - 3245. 2) Bohn, R. E., M. C. Caramanis, and F. C. Schweppe, "Optimal Pricing in Electrical Networks Over Space and Time", The Rand Journal of Economics, Vol. 15, No. 3 (Autumn 1984), pp. 360 - 376. 3) Schweppe, F., et al, "Homeostatic Control for Electric Power Usage", IEEE Spectrum, July 1982, pp. 44 - 48. 4) Schweppe, F. C., Caramanis, M. C., Tabors, R. D., and Bohn, R. E., Spot Pricing o Electricity, Kluwer Academic Publishers, f Boston, MA, 1988. 5) Tabors, R. D., F. C. Schweppe, and M. C. Caramanis, "Utility Experience with Real Time Rates", IEEE Summer Power Meeting, 1988. 6) Garcia, E. V., and J. E. Runnels, "The Utility Perspective of Spot Pricing", IEEE 1984 Summer Power Meeting, Seattle, Washington, July 15 - 20, 1984. Paper 84-SM-:54-2. 7) Berg, Sanford V., J. Adams and B. Niekum, Power Factors and the Efficient Pricing and Production of Reactive Power", The Energy Journal, Vol. 4, Special Electricity Issue, pp. 93 102. 8) Ray, D., and F. Alvarado, "Use of an Engineering Model for Economic Analyses in the Electric Utility Industry", Department of Electrical and Computer Engineering, University of Wisconsin-Madison, 1988, presented at the Advanced Workshop on Regulation and Public Utility Economics, Rutgers University, May 25-27, 1988. 9) Lasdon, L.S. and Waren, A.D., "Generalized Reduced Gradient Software for Linearly and Nonlinearly Constrained Problems", f in Design and Implementation o Optimization Software, H. Greenberg, ed., Sijthoff and Noordhoff, pubs., 1979.
Martin L. Baughman (S, 72) was b m on February 18,1946 in o Paulding, Ohio. He received his BS in Electrical Engineeringfrom Ohio Northem University in 1968 and his MSEE and PhD degrees in electrical engineering at MIT in 1970 and 1972, respectively. Dr. Baughman was a Research Associate at Massachusetts Institute of Technology from 1972 to 1975, at which time he joined the University of Texas at Austin as a Senior Research Associate. In 1976 he joined the faculty of the Department of Electrical and Computer Engineering as an Assistant Professor. In 1979 he coauthored a book with Paul Joskow on electricity supply planning entitled Electricitv in the U n i w s : Models and Policv Analv&. From 1984 to 1986 he chaired the National Research Council Committee on Electricity in Economic Growth. He has served as a consultant to several agencies, including Edison Electric Institute, the MIT Energy Laboratory, the Economic Council of Canada, and the Ministry of Planning in Saudi Arabia, and the Electric Power Research Institute. Dr. Baughman is a member of the Intemational Association of Economists and registered ProfessionalEngineer in the state of Texas.

N. Siddiai was bom in Chittagong, Bangladesh on September 1,1964. He received a B.Sc. (Engineering) from Bangladesh University of Engineering and Technology in 1988. He received a Master degree in Electrical Engineering f o the University of rm Texas at Austin in 1989. He has been a Graduate Research Assistant with the Center for Energy Studies at the University of Texas at Austin since September, 1988, where he is pursuing a PhD in the Department o Electrical and Computer f Engineering. His research interests are in the areas of power systems economics, electricity pricing, and optimal power dispatch.