Integrated engineering and economic principles for system operations

In this paper, we discuss the results of the first phase of the EPRI project on integrated engineering and economic system operations. The intent is to elicit open discussion for establishing a methodology that addresses two aspects of system operations - engineering management of the transmission system, and administration of the associated commercial system of markets. This objective requires a perspective that unifies engineering and economic considerations. It introduces economic analysis of some aspects of operational procedures, and symmetrically, it ensures that market designs are consistent with engineering requirements. In the five years since restructured wholesale markets began, experience has shown repeatedly that power markets cannot be designed by copying models from other industries, and equally, that engineering practices inherited from the era of vertically integrated utilities must be adapted to a radically altered environment. Operating engineers now rely substantially on markets to obtain needed resources, while at the same time their responsibilities are to support and facilitate commercial activity. Successful development of this methodology enhances performance in both domains.