A new reward-penalty mechanism for distribution companies based on concept of competition

In this paper, a new method for designing procedure of Reward-Penalty Scheme (RPS) in distribution system is proposed. Being fair and adoptable in viewpoint of distribution companies (DisCos) are main superiorities of the proposed RPS. Established based on concept of the Yardstick theory, its application can ensure regulators that a perfect competition will be created between DisCos to improve the service reliability. Also, such a regulation scheme can be a key for power system decision makers in order to prevent the DisCos from decreasing service reliability. Aimed to reach a fair mechanism, the proposed RPS rewards/penalizes the DisCos only compared with the other ones owning similar conditions. In this regard, Fuzzy C-means (FCM) clustering technique is applied to effectively categorize the similar DisCos into different groups. The average system reliability indices, i.e. System Average Interruption Frequency Index (SAIFI) and Expected Energy Not Supplied (EENS) are chosen as the comparison criteria in the proposed RPS. In order to illustrate efficiency of the proposed method, the proposed RPS is implemented on the Iranian electric power distribution sector to compare the abilities of different companies in reaching the predetermined goals.