Reactive Power Service Costs Allocation in a Competitive Market

Presently, the electricity sector is immersing in a restructuring process, operationally and commercially, moving from a vertical integrated model to market oriented model. Different market models have been proposed and some of them are currently in operation. These models present a common underlying market, known as primary market. The primary market defines the framework for executing active power transactions for a given period of time (energy). To support energy transactions, additional services are required. These services can be considered as an embedded component of the transactions or traded in additional markets. The market design will not only depend on number of players but also on the transmission system configuration. This paper presents a base-cost methodology for identifying and allocating reactive power services costs. The market model considered is a primary market with centralized reactive power management. One case study is presented here to illustrate the proposed methodology.