Customer-Specific Metrics For Regulation and Load-Following Ancillary Services

In competitive electricity markets, the costs for each ancillary service should be charged to those who cause the costs to be incurred with charges based on the factors that contribute to these costs. For example, the amount of generating capacity assigned to the regulation service is a function of the short-term volatility of system load. Therefore, the charges for regulation should be related to the volatility of each load, not to its average demand.

This report discusses the economic efficiency and equity benefits of assessing charges on the basis of customer-specific costs (rather than the traditional billing determinants, MWh or MW), focusing on two key real-power ancillary services, regulation and load following. We determine the extent to which individual customers and groups of customers contribute to the system's generation requirements for these two services. In particular, we analyze load data to determine whether some customers account for shares of these two services that differ substantially from their shares of total electricity consumption.