In a continuing series on utility industry restructuring, Oak Ridge has just released a new report on Ancillary Services:

“Creating Competitive Markets for Ancillary Services,” ORNL/CON-448,
Eric Hirst and Brendan Kirby, October 1997

FERC has recognized the importance of ancillary services for bulk-power reliability and support of commercial transactions on interconnected transmission systems, and Order 888 includes a pro forma tariff for six key ancillary services. To date most tariffs that have been filed have prices these services on the basis of traditional cost-of-service (embedded) costs. Because most of these services are provided by generating units, however, it should be possible to create competitive markets for them. Recent proposals for ISOs call for such markets, but lack the details on how these markets would be structured and operated.

This report describes a spreadsheet model that simulates markets for sevsen services: losses, regulation, spinning reserve, supplemental reserve, load following, energy imbalance, and voltage support. The work demonstrates the likely complexity of markets for energy and ancillary services, arising because the markets are highly interdependent. Costs and prices will vary considerably as functions of system load and current spot price of energy. Also, embedded cost prices bear little relationship to costs and prices that would actually occur in competitive markets. (Capital costs which figure so prominently in embedded costs would be largely irrelevant, and opportunity costs ignored in cost of service analysis can dominate the prices of some ancillary services at times.)

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Copies of this report and others listed below can be obtained from Ethel Schorn, Oak Ridge National Laboratory, PO Box 2008, Oak Ridge, TN 37831-6206, e-mail schornem@ornl.gov, or fax 423-576-8745.
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Eric Hirst, who is always interested in discussing industry issues, can be reached at 423-574-6304, hirstea@ornl.gov

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ELECTRIC-INDUSTRY POLICY STUDIES
Here is a partial list of recent ORNL publications, including several earlier ones on Ancillary Services:

L. Baxter, E. Hirst, and S. Hadley 1997, Transition-Cost Issues for a Restructuring U.S. Electricity Industry, ORNL/CON-440, March.

E. Hirst, and B. Kirby 1997, Ancillary-Service Details: Dynamic Scheduling, ORNL/CON-438, January.

E. Hirst 1996, “Bulk-Power Reliability: More Than Apple Pie and Motherhood,” The Electricity Journal 9(10), December.

E. Hirst 1996, Ancillary-Service Details: Regulation, Load Following, and Generator Response, ORNL/CON-433, September.

E. Hirst, S. Hadley, and L. Baxter 1996, Factors that Affect Electric-Utility Stranded Commitments, ORNL/CON-432, July.

L. Baxter, S. Hadley, and E. Hirst 1996, Strategies to Address Transition Costs in the Electricity Industry, ORNL/CON-431, July.

B. Kirby and E. Hirst 1996, Ancillary-Service Costs for 12 U.S. Electric Utilities, ORNL/CON-427, March.

B. Tonn and M. Schweitzer 1996, Public Policy Responsibilities in a Restructured Electric Industry: Analysis of Values, Objectives, and Approaches, ORNL/CON-428, March.

S. W. Hadley 1996, ORFIN: An Electric Utility Financial and Production Simulator, ORNL/CON-430, March.

E. Hirst and B. Kirby 1996, Electric-Power Ancillary Services, ORNL/CON-426, February.