Deregulation in Power System
Atul Gilhotra
Research Scholar
Department of Electrical Engineering
Guru Nanak Dev Engineering College
Ludhiana, India
Atulkmr883@gmail.com
Abstract— This paper focuses on the Objectives of the
deregulation and Effects of the deregulation on the whole
power system. It also provides the Pros and Cons of the
deregulation. This paper gives a general background of
research and development in the field of deregulation of the
power sector
Keywords—Deregulation History, Deregulation emerges,
Stability of power system in deregulation, Technical
challenges.
I. INTRODUCTION
AS LONG AS MOST OF US CAN REMEMBER THAT PUBLIC
UTILITIES HAVE BEEN OPERATED AS REGULATED MONOPOLIES.
IN THE LAST FEW YEARS AND STATE BY STATE, THOSE
UTILITIES HAVE BEEN OR BEING, DEREGULATED. WHAT DOES
THAT MEAN?
Before the energy deregulation, one company provided all
aspects of your electric service–generation and sales and
delivery, billing and support. After deregulation, all of these
components were separated. The rules differ from the state to
state, but mainly, generally speaking, the power plants, the
transmission also retail suppliers and billing companies, and
delivery companies (the ones who own the poles and wires)
are no longer a single company. In deregulation environment,
generation and transmission and also distribution are
independent activities and there is a competition among
generators mainly for customers. Main benefits from the
deregulation are, cheaper electricity, efficient capacity
expansion planning, cost minimization, more choice, and
better service.
II. ELECTRIC INDUSTRY HISTORY – HOW IT HAS
TRADITIONALLY FUNCTIONED
• It became clear that generation, distribution, and sale
of electricity was virtually a monopoly.
• Some municipalities established publicly owned
utilities, but most of the electric power was provided
by private companies. These electric utilities did
purchase some electricity and most of the electricity
they sold was mainly generated by the company
itself.
• Because of its monopolistic nature, states quickly
established that "Public Utility Commissions" (PUC)
to regulate the price of electricity sold to the
consumers. Under standard type of regulation, the
utility would justify its rates by accounting for the
cost of producing and distributing and marketing of
the electricity and would be entitled to “fair” rate of
return.
Mainly The basic features of the electricity supply
industry (ESI) restructuring, which will be of the
interest to both the general reader and the specialist
engineer, are as follows:
 To introduce the competition into a hitherto
monopolistic industry.
In order to achieve this, to separate the functions of
power generation, transmission, distribution, and electricity
supply to consumers.
To create the several competing electricity generations
companies (horizontal unbundling).
To recognizing that power transmission system is
a natural monopoly and, accordingly, to make them
the special regulatory provisions in this respect.
To allow the consumers to exercise choice between
them
suppliers that are generation companies, while still
using the existing transmission facilities.
III. Deregulation Emerges
Thus, in the 1980s, a movement began to increase the
efficiency of the generation sector by letting independent
entrepreneurs compete for supply power to the utility. In
1992, Congress passed additional legislation which allowed
generating companies to be exempt from regulation and have
access to the nation’s distribution systems at “just and
reasonable” rates. This development opened the door to a
restructuring of the electric power industry by allowing for
market competition among the power generators. The intent
and purpose of deregulation were presented as a way to
improve the quality of the people’s lives by lowering the cost
of a critical commodity that is Electricity. Deregulation was
supposed to do for the power industry what it did in the airline
and telecommunications industries that bring consumers lower
prices and more competition. The main argument used to
support deregulation is that freer market promotes efficiency
in a regulated market environment, wholesale and retail
electric power prices are calculated based on the utility’s
costs.
• “Energy Deregulation will be bigger than the
Internet.” said by Jack Welch, Former CEO of
General Electric.
• “Energy Deregulation will create the largest
transfer of wealth in US history," said byWarren
Buffett, Investor
Deregulation is the act or process of removing rules or
regulations. Electric deregulation has opened up the
marketplace in a number of states and has enabled consumers
to choose from multiple electricity providers which are
competing for their business. The point of deregulation is
ultimate to reduce prices and by introducing competition &
choice into the market. Deregulation was primarily driven by
large industrial users, who thought they could save money,
and for energy companies, who thought they could make
money out of it.
Politicians mainly promoted the concept of consumer choice
as a primary benefit of deregulation because they wanted wide
voter supports, which is why the actual legislation had names
like the “Electric Consumers’ Power to Choose Act.”
The generation of electricity is accomplished by providers
that have some sort of power generating means, whether that
is either nuclear, coal, fossil fuels, wind, solar or from various
other types. When any provider generates power and places
that power into the state grid, they have a right to sell that
power to any consumer willing to pay them any price. What
most Utilities don’t want you to know is that if you switch
suppliers in a deregulated state, it has not any EFFECT on
your service.
If there is a storm and the power is knocked out, and the utility
that has contracted with the state to fix those outages will still
fix the problem. The only change is in the price your new
supplier charges you for electricity that you consume. For the
electric industry, deregulation means the generation portion of
electricity service will be open to competition.
However, the transmission and distribution of the electricity
will remain regulated and your local utility company will
continue to distribute electricity to you and provide customer
services to you. The only generation of electricity is being
deregulated that is which means you will have the opportunity
to shop around for the electricity-generation supplier of choice
• With deregulation, the consumers can be purchase
electricity service from a variety REP's that is Retail
Electricity providers that purchase power from power
plants and handle billing and customer service.
• As the electricity is delivered over the same wires
and poles by the incumbent, as similar as
Cell Phone Providers, the switch is seamless for the
consumer.
In a deregulated environment, a generating company has in
principle no other objective than to produce electricity and sell
with maximum profit. This leads to the following problem
formulation:-
• In this formulation, no penalty for possible
curtailment of contractual obligations is included. It
is assumed that in case a generating company has not
sufficient resources to cover its contractual
obligations, so this can be done through purchases in
the spot market.
• This might involve a financial risk, but no liability in
case of a national deficit.
IV. Power System Stability in the Deregulated
Environment
The basic objective of the operator in such a deregulated
environment would be to maintain the reliable and the
uninterrupted services to the load. The reliability of the system
is composed of two aspects; adequacy and security. Mainly
System adequacy is defined as the ability to supply the energy
requirements of the system taking into account planned and
unplanned outages of electrical components. And System
security is defined as the ability to withstand sudden
disturbances without causing major blackouts and
interruptions. System security is made of steady-state and
dynamic security analysis. The deregulation of power systems
has brought several new entities in the electricity marketplace.
so there is a need to assess the impact of Independent Power
Producers (IPP), Non-Utility Generators (NUG) and
Distributed Generators (DG) on system operation and
stability.
Issues in light for the deregulation of the power system:
1. Reliability criteria used
2. On-line security assessment
3. Robust stability controlling
4. Coordinated emergency controlling
5. Real-time system monitoring and control
6. Wide-spread use of distributed generation
V. TECHNICAL CHALLENGES OF AN AGEING
POWER SYSTEM IN A DEREGULATED INDUSTRY
The deregulation of the power industry mainly driven by
economic factors has coincided with and resulted in a number
of technical or structural challenges. One is a major shift in
the age profile of the installed power system plant that is
machinery age. Another is the maintenance of the level of
technical skills within more cost controlled organizational
structures.
A). CHALLENGE OF AN AGEING
INFRASTRUCTURE:- assessment of
remanent life
Deregulation has resulted in increasing pressures within the (374)
electricity supply and related industries to obtain the
maximum utilization of existing electrical plant. failure of ageing
for example “To power transformers, due to their large plant
numbers at the lower ratings (under 5 MVA) and their
considerable capital replacement cost (eg, over $1 million
inadequate
each) at the higher value ratings (up to 200MVA). A
significant outcome to emerge over the last decade has been diagnostic
the retention of older transformers which might have been methods(231)
retired due to obsolescence or replaced by the higher rated insulation
equipment in a more expansionary economy. refurbishment(1
09)
Total Population Older Than 25 Years failure of new
plant (89)
60
50
40
Figure 1:- (a) Typical transformer age profiles over recent 25
30 years. (b) Results from CIGRE/ESAA survey on user
20 concerns with major electrical plant

10
0
B). CHALLENGE OF TECHNICAL SKILLS
1975 1980 1985 1990 1995 2000
AVAILABILITY:-

Year • Before the technical issues can be effectively

addressed, professional skills will need to be
available within, or readily obtainable by the
organization.
• Over recent years there has also been a drift away
from power engineering as a career towards sectors
such as information technology which is the main
reason.
• However, issues such as the internal loss of basic
technical knowledge or understanding of the
condition of their assets and the further impact of
outsourcing on the skill retention and development of
the residual internal workforce are amongst other
factors which must be considered.

C ). CONDITION MONITORING APPLICATION

CHALLENGES :-

EQUIPMENT DEFECT
 A sensor responsive to leading defect
Noise reduction and data transmission
Data interpretation and decision making
CORRECT DECISION ON PLANT STATUS
Figure 2: Links required for decision making by a
condition monitoring system
D). CHALLENGES IN RISK ASSESSMENT IN A
DEREGULATED ENVIRONMENT :-
This is the application of traditional risk Assessment
techniques to multiple contingency outages, or the application
of these techniques where the data is sparse and penalties for
an unforeseen outage sever. With electricity market
deregulation and participant profitability so important, as well
as the security of supply, unplanned outages may result in
heavy financial penalties.
VI. CONCLUSION:-
This paper gives mainly an overview of concept deregulation
of the power sector with practical requirements, the historical
events, the present state, and techniques. In the present era of
deregulation in the utility sector, power system operators are
confronted with new challenges and some existing ones with a
bigger risk associated.
Underlying many of the challenges is an aging power system
infrastructure(machinery). The optimum resourcing and
management of a skilled workforce in restructured entities
also requires careful consideration and is a challenge in itself.
Some of the more pressing technical challenges are in the
management of greatly increased volumes of condition
monitoring data in an environment of heightened penalties for
a loss of supply. The use of data mining techniques and a
variation of the traditional probabilistic technique for risk
assessment are proposed.
In summary, the paper has considered some of the emergent
technical challenges of an aging power system in an electrical
deregulated environment and some of the more effective tools
which can be deployed to meet these challenges.
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