Understanding electric utilities and de reguration 2ed
Understanding Electric Utilities and De-Regulation Second Edition © 2006 by Taylor & Francis Group, LLC POWER ENGINEERING Series Editor H. Lee Willis KEMA T&D Consulting Raleigh, North Carolina Advisory Editor Muhammad H. Rashid University of West Florida Pensacola, Florida 1. Power Distribution Planning Reference Book, H. Lee Willis 2. Transmission Network Protection: Theory and Practice, Y. G. Paithankar 3. Electrical Insulation in Power Systems, N. H. Malik, A. A. Al-Arainy, and M. I. Qureshi 4. Electrical Power Equipment Maintenance and Testing, Paul Gill 5. Protective Relaying: Principles and Applications, Second Edition, J. Lewis Blackburn 6. Understanding Electric Utilities and De-Regulation, Lorrin Philipson and H. Lee Willis 7. Electrical Power Cable Engineering, William A. Thue 8. Electric Systems, Dynamics, and Stability with Artificial Intelligence Applications, James A. Momoh and Mohamed E. El-Hawary 9. Insulation Coordination for Power Systems, Andrew R. Hileman 10. Distributed Power Generation: Planning and Evaluation, H. Lee Willis and Walter G. Scott 11. Electric Power System Applications of Optimization, James A. Momoh 12. Aging Power Delivery Infrastructures, H. Lee Willis, Gregory V. Welch, and Randall R. Schrieber 13. Restructured Electrical Power Systems: Operation, Trading, and Volatility, Mohammad Shahidehpour and Muwaffaq Alomoush 14. Electric Power Distribution Reliability , Richard E. Brown © 2006 by Taylor & Francis Group, LLC 15. Computer-Aided Power System Analysis, Ramasamy Natarajan 16. Power System Analysis: Short-Circuit Load Flow and Harmonics, J. C. Das 17. Power Transformers: Principles and Applications, John J. Winders, Jr. 18. Spatial Electric Load Forecasting: Second Edition, Revised and Expanded, H. Lee Willis 19. Dielectrics in Electric Fields, Gorur G. Raju 20. Protection Devices and Systems for High-Voltage Applications, Vladimir Gurevich 21. Electrical Power Cable Engineering, Second Edition, William Thue 22. Vehicular Electric Power Systems: Land, Sea, Air, and Space Vehicles, Ali Emadi, Mehrdad Ehsani, and John Miller 23. Power Distribution Planning Reference Book, Second Edition, H. Lee Willis 24. Power System State Estimation: Theory and Implementation, Ali Abur 25. Transformer Engineering: Design and Practice, S.V. Kulkarni and S. A. Khaparde 26. Power System Capacitors, Ramasamy Natarajan 27. Understanding Electric Utilities and De-regulation: Second Edition, Lorrin Philipson and H. Lee Willis © 2006 by Taylor & Francis Group, LLC Understanding Electric Utilities and De-Regulation Second Edition Lorrin Philipson H. Lee Willis A CRC title, part of the Taylor & Francis imprint, a member of the Taylor & Francis Group, the academic division of T&F Informa plc. Boca Raton London New York © 2006 by Taylor & Francis Group, LLC Published in 2006 by CRC Press Taylor & Francis Group 6000 Broken Sound Parkway NW, Suite 300 Boca Raton, FL 33487-2742 © 2006 by Taylor & Francis Group, LLC CRC Press is an imprint of Taylor & Francis Group No claim to original U.S. Government works Printed in the United States of America on acid-free paper 10987654321 International Standard Book Number-10: 0-8247-2773-8 (Hardcover) International Standard Book Number-13: 978-0-8247-2773-4 (Hardcover) Library of Congress Card Number 2005050630 This book contains information obtained from authentic and highly regarded sources. Reprinted material is quoted with permission, and sources are indicated. A wide variety of references are listed. Reasonable efforts have been made to publish reliable data and information, but the author and the publisher cannot assume responsibility for the validity of all materials or for the consequences of their use. No part of this book may be reprinted, reproduced, transmitted, or utilized in any form by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying, microfilming, and recording, or in any information storage or retrieval system, without written permission from the publishers. Danvers, MA 01923, 978-750-8400. CCC is a not-for-profit organization that provides licenses and registration for a variety of users. For organizations that have been granted a photocopy license by the CCC, a separate system of payment has been arranged. Trademark Notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. Library of Congress Cataloging-in-Publication Data Philipson, Lorrin, 1945- Understanding electric utilities and de-regulation / Lorrin Philipson, H. Lee Willis.-- 2nd ed. p. cm. -- (Power engineering ; 27) Includes bibliographical references and index. ISBN 0-8247-2773-8 (alk. paper) 1. Electric utilities. 2. Electric utilities--Deregulation. 3. Deregulation. I. Title: Understanding electric utilities and deregulation. II. Willis, H. Lee, 1949- III. Title. IV. Series. HD9685.A2P48 2005 333.793'2--dc22 2005050630 Visit the Taylor & Francis Web site at and the CRC Press Web site at Taylor & Francis Group is the Academic Division of T&F Informa plc. © 2006 by Taylor & Francis Group, LLC For permission to photocopy or use material electronically from this work, please access www.copyright.com (http://www.copyright.com/) or contact the Copyright Clearance Center, Inc. (CCC) 222 Rosewood Drive, http://www.taylorandfrancis.com http://www.crcpress.com iii Series Introduction Power engineering is the oldest and most traditional of the various areas within electrical engineering, yet no other facet of modern technology continues to undergo a more significant evolution in technology or industry structure. In the 120 years since its first commercial use, electricity has grown to be a cornerstone of our civilization for three reasons. First, it is incredibly flexible in application, capable of making motors turn, lights glow, or boom boxes play hip-hop. Further, it is very controllable in any of these and thousands of other applications. Well-engineered equipment can dole out amounts as small as one microwatt or as great as one billion watts, and control flow at any of these levels to within a few hundredths of a percent. Finally, electric power is quite inexpensive, a fact lost on many people spoiled by the success of an industry that is often taken for granted. Understanding Electric Utilities and De-regulation – Second Edition presents a broad, non-technical look at the electric power industry, its technology, structure and organization, as it makes its transition from the regulated framework within which it functioned for over a century to the partly de-regulated structure that is its future. De-regulation has driven many changes in the power industry, among them an influx of executives, managers, and skilled professionals from other industries – de-regulated industries – to help drive its success within that new structure. In addition, despite dire predictions of disaster, the industry is in many ways thriving under de-regulation, even as it wrestles with many new challenges. As a result it is adding new engineers, © 2006 by Taylor & Francis Group, LLC Series Introduction iv computer scientists, accountants, and business managers, many only recently out of college. Seasoned veterans from other industries and recent graduates alike will find this book a practical, accessible explanation of their new industry, its technologies, operation, history, habits (good and bad), and future. Like all the books in the Taylor & Francis (formerly Marcel Dekker) Power Engineering Series, Understanding Electric Utilities and De-regulation – Second Edition puts modern technology in a context of practical application, useful as a reference book as well as for self-study and advanced classroom use. The Power Engineering Series includes books covering the entire field of power engineering, in all of its specialties and sub-genres, all aimed at providing practicing power engineers with the knowledge and techniques they need to meet the electric industry’s challenges in the 21st century. H. Lee Willis © 2006 by Taylor & Francis Group, LLC v Preface Understanding Electric Utilities and De-Regulation – Second Edition is, like the first edition, a non-technical description of the electric power industry, what it does, how it works, its history, and its future, along with an examination of the major issues revolving around its transition from a regulated to a de-regulated industry. Both the electric power industry and the character of its de-regulation have changed rapidly since the first edition was published, in ways not completely anticipated by the industry, or the authors. Some aspects of de- regulation worked as planned. But many did not, and as a result industry structure, government policy, and grid operating rules have evolved in ways not originally foreseen. Other factors, including massive blackouts and new technologies, have also had their impact. This second edition brings these and other aspects of the industry up to date, and discusses some of the shortcomings of early de-regulation and how they were addressed. It also covers three topics new to the second edition, each of great growing importance to the industry: aging electric infrastructures, service reliability, and blackouts. This book is intended as a reference book and a tutorial guide for those many non-engineering professionals who find themselves part of an industry dominated at every turn by esoteric engineering concepts and technical terminology. It will also serve engineers, economists, and utility managers by providing a non-technical overview of how their particular fields interact with the whole. Electric power has become such a wide landscape that many of the most experienced experts have little opportunity to see how their contributions fit into the big picture, particularly with respect to how all its interconnected facets are evolving under de-regulation. The authors have endeavored to make the entire discussion as understandable as possible, but nonetheless complete. © 2006 by Taylor & Francis Group, LLC Preface vi This book was organized and written with an expectation that most people who use it will not read the book through from beginning to end, that busy professionals want to read selectively about only the matter of immediate interest. Therefore, the authors have included what they believe is a particularly detailed index and a lengthy glossary of terms. Most important, this book is organized into chapters and sections by topical areas (e.g., Retail Sales, Blackouts, Distributed Generation, Fuel Cells) that have been written so that while each fits into the whole, each is also a stand-alone tutorial on its particular topic. This makes the book, if read through from start to finish, somewhat redundant, in that the same issue or consideration might be presented and discussed several times in various places, if it bears on several different areas within the power field. electric utilities and its traditional regulated structure, under which the industry operated for over a century and within which many of the industry’s most haloed and institutionalized habits and expectations were forged. when, where and how in overview. It is impossible, even in an entire book, to delineate every detail or every concept or every structure that has been proposed, debated, or even actually tried in the power industry. Instead, this chapter sticks to just the major concepts and how they interact with one another, and discusses how and why some issues are the subject of intense debate and concern. electricity and electric power itself – how the use of electric power developed and how that fueled the industry; technical – how the equipment, systems, and technology developed and evolved; and business – how and why people invested in and built an industry that is today a cornerstone of our technology and culture. Of course, the power industry is built upon a base of fundamental electric engineering concepts and principles and depends wholly on the performance of complicated electrical equipment whose designs have been honed to near perfection over the past 120 years. The next six chapters discuss electric power, covers basic electric power and electrical engineering concepts: voltage, current, discuss how electric power is manufactured, or generated. Traditional central station generating plants, typically the size of large office buildings and capable of producing power for an entire town, are covered in Chapter 6, which also presents a basic overview of how and why a generator works. Renewable energy – solar, wind, and other natural sources – are discussed in Chapter 7, © 2006 by Taylor & Francis Group, LLC The first three chapters cover the power industry. Chapter 1 discusses Chapter 2 summarizes the larger issues of de-regulation – its what, why, Chapter 3 gives a history of the power industry from three perspectives: power systems, and the various equipments and functions involved. Chapter 4 and power, and the basics of power systems and their operation. Chapter 5 looks at the myriad ways that electric power is used. Chapters 6, 7, and 9 . references and index. ISBN 0-8247-2773-8 (alk. paper) 1. Electric utilities. 2. Electric utilities- -Deregulation. 3. Deregulation. I. Title: Understanding electric. Engineering: Design and Practice, S.V. Kulkarni and S. A. Khaparde 26. Power System Capacitors, Ramasamy Natarajan 27. Understanding Electric Utilities and De-regulation: