Advanced pricing in electrical systems .2. Implications

Part I [1] of this paper set forth a mathematical formulation of a model for real-time pricing of electricity that included selected ancillary services and extended the theory to incorporate constraints on power quality and environment impact that often influence the operation of a power system. Derived herein are optimal real-time prices for both real and reactive power. The optimal prices are temporally and spatially differentiated. The prices derived include additive premia, or opportunity costs, reflecting the effects of voltage regulation, maintenance of generation and transmission reserves, regulation of frequency and tie-line flows, removal and/or control of power harmonics, and others. This paper concludes with a discussion of the implications of the optimal prices for pricing of both retail and wholesale services.