SIMULATING THE OPERATION OF MARKETS FOR BULK-POWER ANCILLARY SERVICES

The U.S. Federal Energy Regulatory Commission (FERC) requires electric utilities to offer six ancillary services. Most of the tariffs filed with FERC price these services on the basis of traditional cost-of-ser vice (embedded) costs. Because most of these services are provided by generating units, however, it should be possible to create competitive markets for them. This paper describes the structure of, and results from, a spreadsheet model that simulates markets for seven services: l osses, regulation, spinning reserve, supplemental reserve, load follow ing, energy imbalance, and voltage support. The model also analyzes sy stem control, although this service will continue to be provided solel y by the system operator under cost-based prices. Developing this comp uter model demonstrated the likely complexity of markets for energy an d ancillary services. This complexity arises because these markets are highly interdependent. For example, the cost of regulation (the frequ ent change in generator outputs to track the minute-to-minute fluctuat ions in system load) depends strongly on which units are already being dispatched to provide energy and losses, their variable costs, and th eir operating levels relative to their maximum and minimum loading poi nts.