| Our society derives a quantifiable benefit from electric power. In particular, forced outages or blackouts have enormous consequences on society, one of which is loss of economic surplus. Electric utilities try to provide reliable supply of electric power to their customers. Maximum customer benefit derives from minimum cost and sufficient supply availability. Customers willing to share in "availability risk" can derive further benefit by participating in controlled outage programs. Specifically, whenever utilities foresee dangerous loading patterns, there is a need for a rapid reduction in demand either system-wide or at specific locations. The utility needs to get relief in order to solve its problems quickly and efficiently. This relief can come from customers who agree to curtail their loads upon request in exchange for an incentive fee. This thesis shows how utilities can get efficient load relief while maximizing their economic benefit. This work also shows how estimated customer cost functions can be calibrated, using existing utility data, to help in designing efficient demand management contracts. In order to design such contracts, optimal mechanism design is adopted from "Game Theory" and applied to the interaction between a utility and its customers. The idea behind mechanism design is to design an incentive structure that encourages customers to sign up for the right contract and reveal their true value of power. If a utility has demand management contracts with customers at critical locations, most operational problems can be solved efficiently. This thesis illustrates how locational attributes of customers incorporated into demand management contract design can have a significant impact in solving system problems.; This kind of demand management contracts can also be used by an Independent System Operator (ISO). During times of congestion a loss of economic surplus occurs. When the market is too slow or cannot help relieve congestion, demand management can help solve the problem. Another tool the ISO requires for security purposes is reserves. Even though demand management contracts may not be a good substitute for spinning reserves, they are adequate to augment or replace supplemental and backup reserves. |
