Retail transmission services like those being provided by the National
Grid Company (NGC) in England and Wales pose new challenges for the p
ricing of reactive power supply. A reactive power market approach has
been proposed by NGC and continues to be evaluated. Such an approach i
ncludes a novel requirement for transmission constrained economic disp
atch of VArs, a problem in the security constrained optimal power flow
(OPF) class. The problem formulations handled by the OPF package in u
se could not accommodate NGC's requirements. This paper describes the
reactive pricing problem being addressed, the modeling requirements, a
nd the resulting extensions made to the OPF formulation and package. I
t discusses the test results obtained to date on the NGC system.