Quality insurance based electric energy pricing with multi-quality

Deregulation of electricity market makes electric energy supplied with different quality levels and according different prices as common merchandise necessity. Quality insurance method provides a new approach to solve this problem. This paper introduces quality insurance method into pricing for electric energy with different quality, which is to add power quality (PQ) insurance to basic electric energy price. Consumers provide economic signals to the distribution provider for their desired quality of service through insurance contracts. PQ insurance provides economically efficient investment incentives and alleviates consumers´ PQ disturbances risk. It changes compensation for PQ accidents to compensation choices of everyone. The value of PQ to consumers is thereby made transparent, allowing distribution companies to make efficient investment decisions. Insurance also allocates PQ disturbances risk to the distribution company (which controls the system), instead of consumers (who have little or no control over distribution grids). PQ insurance effectively unbundles delivery and PQ services and enables consumers to receive differentiated PQ based upon their value for this service. This paper describes the potential for PQ insurance to improve both investment efficiency and risk allocation compared to conventional regulatory structures.