IEEE TRANSACTIONS ON POWER SYSTEMS, VOL. 22, NO.

1, FEBRUARY 2007

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A Framework to Implement Supply and Demand Side

Contingency Management in Reliability Assessment
of Restructured Power Systems
Lalit Goel, Senior Member, IEEE, Viswanath P. Aparna, and Peng Wang, Member, IEEE

AbstractThis paper presents a framework to implement

supply and demand side contingency management in the reliability assessment of hybrid power markets. A model for the
independent system operator (ISO) to coordinate reserve and load
curtailment bids for contingency states is introduced to balance
reliability worth and reliability cost. The load curtailments and
generation re-dispatch for a contingency state are determined
based on minimizing the market interruption cost using an optimization technique. A nonsequential Monte Carlo simulation
technique based on this framework has been proposed to evaluate
the customer reliability of restructured power systems with the
hybrid market model. The modified IEEE Reliability Test System
(RTS) is used to illustrate the proposed technique.

Power sold through bilateral contract.

Total power sold by Genco.
Total power purchased by customer.
Curtailment cost for the bilateral transaction.
Curtailment bid of customer for spot market
transaction.
Reserve bid price.
Outage replacement rate.
Failure rate.
For sample
Sampling state of unit.
Sampling state of Genco.
Available capacity of energy units of Genco.
Available capacity of reserve unit.

Index TermsContingency management, customer reliability,

hybrid market, independent system operator (ISO), load curtailment bids, market interruption cost, Monte Carlo simulation, reliability assessment, reserve.

For contingency state

I. NOMENCLATURE

Available capacity of energy units of Genco.

Available capacity of reserve unit.
Total generation of Genco after re-dispatch.
Reserve dispatched.
Power supplied by Genco in the spot market.
Power supplied to customer in the spot
market.
Power supplied through bilateral contract.
Generation curtailed from Genco to the spot
market.
Load curtailed for customer in the spot
market.
Load curtailed for bilateral customer.
EENS of customer k.
Expected reserve dispatch.
Expected market interruption cost.

Index for Genco.

Index for customer.
Index for generating units.
Index for sampling state.
Index for system contingency state.
Number of Gencos.
Number of customers.
Number of units in Genco to supply energy.
Number of units in Genco to provide reserve.
Index for spot market (superscript).
Index for bilateral contract (superscript).
Index for generator (superscript).
Index for customer (superscript).
Number of Monte Carlo samples.
Total reserve.

For unit , Genco , and customer

Capacity of the unit.
Total generation scheduled by Genco.
Capacity of reserve unit.
Power sold by Genco in the spot market.
Power purchased by customer in the spot
market.
Manuscript received August 18, 2005; revised August 17, 2006. Paper no.
TPWRS-00523-2005.
The authors are with Nanyang Technical University, Singapore.
Digital Object Identifier 10.1109/TPWRS.2006.887962

II. INTRODUCTION
ESTRUCTURING of the electric power industry has resulted in the unbundling of main and ancillary services
(AS) such as real power, reactive power, and reserve provision.
Unlike the centralized reliability management used in conventional vertically integrated power systems, these main and ancillary services are traded as products in a power market to provide
an opportunity for both Gencos and customers to participate in
system reliability management. In the process of realization of
self-desired reliability, the participants objective in this competitive environment is to maximize their individual benefits.

0885-8950/$20.00 2006 IEEE

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For the smooth functioning of a power system as a whole, and

for coordinating the activities of all the market participants, the
independent system operator (ISO) plays an important role in
reliability management [1].
In restructured power systems, the ISO or power exchange
(PX) has the overall responsibility to manage system reserves
and load curtailment bids to fulfill the reliability commitments
of Gencos and the reliability requirements of customers. In realtime operation, when generating resources are lost, the ISO will
utilize the reserves or activate the load curtailments. Such a role
by the ISO is very useful in reducing the cost of the expensive reserves and in including customer preferences for reliability needs in the decision-making process. Customers submit
load curtailment bids based on their willingness to reduce demand when requested. Financial incentive programs that reward
the customers for reducing their demand have been initiated in
many power markets such as the interruptible load program in
Singapore [2], NYISO [3], Alberta power pool in Canada [4],
and demand relief program in California [5].
Reserve provisions from both supply side and demand side
have gained importance in the new environment. In [6], various means for the provision of supply and demand side reserves in restructured power systems are examined. Reference
[7] presents the design of a market for interruptible load services
by addressing various issues associated with the procurement
of load curtailment offers. Designing load curtailment contracts
such that customers are compensated sufficiently to participate
voluntarily and at the same time ensuring the benefit maximization of a utility while offering load curtailment is proposed in [8]
and [9]. In order to increase significant gains in economic efficiency, joint dispatch of energy and reserve offers (both supply
and demand side reserves) is proposed in [10].
Reliability evaluation techniques developed in the past were
more suited for vertically integrated power systems [11], [12].
The objective during a contingency state then was to minimize
the system interruption cost [13]. The minimum system interruption cost was based on the estimated damage cost [14] of the
load and the cost of utilizing the system-wide reserve for the
system-wide supply shortage. This was a valid concept then because the customers had no role to play in selecting their power
supplier and/or reliability requirements.
In the new environment, the customers are provided an opportunity to participate in the reliability management. A contingency state may arise due to generation inadequacy (unit failures) in one or many Gencos or due to transmission line outages. In this case, both Gencos and customers can be activated
by the ISO to release the system unbalance. This has changed
the mechanism of reliability management. The reliability evaluation techniques developed for conventional systems have to be
reviewed or modified for suitability of application in the reliability evaluation of restructured power systems.
This paper presents a framework to implement supply and
demand side contingency management in the reliability assessment of hybrid power markets. A model for the ISO to
coordinate the curtailment and reserve costs for a contingency
state is introduced to balance reliability worth and reliability
cost. The load curtailments and generation re-dispatch for a
contingency state are determined based on minimizing the

IEEE TRANSACTIONS ON POWER SYSTEMS, VOL. 22, NO. 1, FEBRUARY 2007

market interruption cost using an optimization technique. A

nonsequential Monte Carlo simulation technique based on this
framework has been proposed to evaluate the reliability of
restructured power systems in the hybrid market model. The
spot market, bilateral, and reserve transactions are considered
in the simulation. The modified IEEE Reliability Test System
(RTS) [15] is used to illustrate the proposed technique.
III. ENERGY AND ANCILLARY SERVICE DISPATCH
IN THE HYBRID MARKET
In the hybrid market, energy can be traded either in the
electricity spot market or through bilateral contracts, spinning
reserve is traded in the ancillary service market, and load
curtailment bids are traded in the ancillary services market
or through bilateral contracts. In the electricity spot market,
Gencos and customers bid the quantity and prices. The energy
market clearing price (EMCP) and sales and purchases of
energy for the Gencos and customers are determined after the
market clearing process. All the Gencos scheduled to supply
energy are paid at the EMCP. All the customers who buy energy
from the spot market pay at the EMCP. The energy price and
quantity through a bilateral contract will be determined by the
corresponding Genco and customer. A hybrid market with m
Gencos and customers is shown in Fig. 1.
The total power sold by Genco through the spot market and
bilateral contracts is
(1)
A Genco will schedule its units to meet the aggregated spot
and bilateral demand . The total power supplied by Genco
with scheduled units to meet the spot and bilateral demand is

(2)
The total power purchased by customer
market is

from the hybrid

(3)
There is also an AS market for reserve and load curtailment
bidding in a hybrid market. Gencos submit their reserve bids
to the reserve market. It is assumed that the reserve units cannot
participate in the energy market, and they are available to take up
load when requested. The reserve bid prices are awarded when
the reserve units are called upon to supply in case of contingencies.
The total reserve in the AS market is
(4)
Customers bid for load curtailment in the AS spot market and
for
through bilateral contracts. A customer submits price

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207

Fig. 1. Framework for contingency management of a hybrid power market.

every MW load curtailed in the spot AS market. Similarly for

is used as the curtailment
bilateral contracts, a flat rate of
cost for every MW load curtailed. Customers are paid based on
their curtailment bids when they are called to interrupt in case
of contingencies.
After the market settlement, the total number of units scheduled for providing energy and reserves from each Genco, the
associated reliability data and installed capacity for each unit,
and the load curtailment cost data from customers are provided
to the ISO for contingency management of the system.
IV. CONTINGENCY MANAGEMENT IN RESTRUCTURED
POWER SYSTEMS
The generation and reserve dispatched by an individual
Genco may or may not be adequate to meet its demand in the
different system states caused by random failures of generating

units. These system states can be divided into two states,

namely, the normal state and the contingency state. In a normal
state, all the Gencos have adequate generation to meet their
demands. In a contingency state, one or more Gencos may have
inadequate supply to meet its/their demands, or one or more
transmission lines may be out of service. In this case, loads
have to be shed, and generation has to be re-dispatched. In
restructured power systems, Gencos and customers have their
own preferences for the activation of reserve and curtailment
of contracts to execute their transactions. The ISO plays an important role for reliable system operation during a contingency
state by coordinating activities such as the activation of reserve
and curtailment of contracts in the interest of all the market
participants.
The procedure for contingency management as shown in
Fig. 1 includes the following steps:

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obtain the transaction and reliability data from the hybrid

market;
identify the contingency state using the contingency enumeration program based on the reliability and capacity
data;
determine the re-dispatched generation, the reserves, and
load curtailments called under the minimization of market
interruption cost using an optimization technique based on
reserve and curtailment costs;
inform all the market participants to curtail their individual
spot market and bilateral transactions, and commit the reserve.
The objective of contingency management is to minimize the
market interruption cost. Market interruption cost consists of the
curtailment cost for the customers interrupted and reserve costs
for the reserve units dispatched. The Genco that has caused the
interruption has to pay the interruption cost. A detailed formulation for minimizing the market interruption cost during a contingency state for the hybrid market model is presented in the
next section.

The curtailment limits for bilateral transactions:

(8)
The curtailment limits for the Gencos in the spot market:

(9)
The curtailment limits for the Customers in the spot
market:

(10)
The limits for the available generation from the Gencos:

(11)
The limits for reserve:

V. OPTIMAL DISPATCH OF RESERVES

AND LOAD CURTAILMENTS

(12)

In conventional power systems, the minimum system interruption cost is determined based on the system-wide curtailment cost due to system-wide supply shortage and reserve cost.
In restructured power systems, the reserves supplied by Gencos
and the activation of customers load curtailment bids are determined by market forces. During contingency state , the ISO
has to determine the reserve units to be dispatched and the customers to be interrupted under the minimum total cost of load
curtailment and reserve dispatched. The contingency management problem by the ISO is formulated as a linear programming
problem with the objective of minimizing the total cost, which
includes the curtailment costs of bilateral customers, the curtailment costs of the spot market customers, and the cost of the
reserve dispatched.
Problem Formulation

(5)
Subject to the following constraints:
The power balance constraints:
(6)
The reserve constraint of the spot market:

(7)

The transmission limits:

(13)
where is the power flow and
is the upper limit of
for line ; optimal dc power flow [16] is used to solve
the problem if transmission is considered.
The variables (or output) for this optimization problem for the
,
contingency state are the bilateral contract curtailments
, Gencos spot transcustomers spot transactions curtailment
, and the dispatch from reserve units
actions curtailment
. The contingency state transactions
,
,
are determined by subtracting the curtailments
,
,
from
,
,
. The sum of the continthe original transactions
gency state spot transactions
and bilateral transactions
of a Genco is equal to its total generation after re-dispatch
.
It should be noted that energy and ancillary services are dispatched separately. However, energy and ancillary services can
be optimized simultaneously in a single market. One of the possible situations is the Poolco market structure. For example, the
power market in Singapore includes both energy and ancillary
services in a single market clearing process to minimize the total
market cost.
VI. RELIABILITY EVALUATION PROCEDURE USING
NONSEQUENTIAL MONTE CARLO SIMULATION
A nonsequential Monte Carlo simulation (MCS) technique
for the reliability evaluation of restructured power systems in
hybrid market models was developed based on the proposed
framework for contingency management. A two-state model
of generating units was used in the simulation. Exponentially

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209

distributed times to failure are assumed for each unit, and the
outage replacement rate (ORR) [11] is used.
The procedure to determine the system state for sample is
as follows.
is
A uniformly distributed random number
generated for each unit scheduled in the energy and reserve
market to determine the state of the unit
Operating state
Failure state

if
if

(14)
units is determined based
The state of Genco with
on the state of each unit of the Genco
(15)
The total available generation from Genco
by

is determined

(16)
The available reserve from each unit in the primary reserve
market is determined by
Fig. 2. IEEE reliability test system.

(17)
The state of the system is determined based on the state of
the Gencos and the transmission lines.
If
for sample and there are no transmission
for
outages, then the system is in the normal state. If
sample , or if there is transmission congestion, then the system
is in contingency state . If sample results in a contingency
state , then all the symbols with subscript are represented by
subscript .
The procedure to evaluate the customer reliability is as follows.
Step 1) Input transactions, reserve and curtailment bids,
and the reliability data determined from the hybrid
market.
Step 2) Generate the sample state of all the units scheduled
in the market by using (14).
Step 3) Determine the states of each Genco using (14) and
(15).
,
using (16) and (17), respecStep 4) Evaluate
tively.
Step 5) Check the state of the Gencos and transmission lines
to determine the system state. If the system is in a
contingency state, go to Step 6; else, if the system is
in the normal state, go to Step 9.
,
,
, and
using the optiStep 6) Determine
mization technique for the contingency state.
Step 7) Inform the Gencos about the reserve units dispatch
and contingency state transactions.
Step 8) Inform the customers about the load curtailments and
contingency state transactions.
, go to Step 2; else, go to Step 10.
Step 9) If
Step 10) Calculate the customer reliability indexes, reserve
dispatched, and market interruption cost.

The expected load not supplied (ELNS) for customer

is

(18)
The expected reserve dispatched (ERD) from the reserve market
is

(19)
The expected market interruption cost (EMICOST) is

(20)

VII. SYSTEM ANALYSIS

The IEEE RTS was analyzed to illustrate the proposed technique. The single-line diagram of the test system is given in
Fig. 2.
The system configuration data for the RTS are given in [12]
and [15]. The modified failure rate data of the generating units
are shown in Table IV of the Appendix. The test system is modi,
fied into a restructured power system with ten Gencos (G1,
G10) and 17 aggregated customers (L1, , L17) as shown in
Fig. 2. The load at hour 18 of the second day of week 51 of
the IEEE load model is analyzed. The transactions between the
Gencos and customers are given inTable V of the Appendix.

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TABLE I
ELNS (MW) OF THE CUSTOMERS

TABLE II
ELNS (MW) OF THE CUSTOMERS

TABLE III
ELNS (MW) OF THE CUSTOMERS

Fig. 3. Reserve costs and customer curtailment costs.

The curtailment bids are shown in Table VI. The energy and reserve units participating in the market are shown in Table VII.
Three different cases of reserve bids submitted by the Gencos
are shown in Table VIII. The lead-time is assumed to be four
hours.
A. Customer Reliability Indexes
The customer reliability indexes for the reserve bids of Case I
(of Table VIII) are presented in Table I. The solutions converge
after 2500 Monte Carlo samples. It can be observed from Table I
that the ELNS of customers depend on the curtailment bids of
customers and the portion of spot and bilateral transactions. The
difference between spot and bilateral transactions curtailments
is that the bilateral transaction curtailment of a customer is based
on the generation inadequacy resulting from the corresponding
Genco, whereas in the case of spot market transactions, the customer curtailment is based on the generation inadequacy of the
pool. For instance, aggregated customer L15 has 80% bilateral
transactions and 20% spot transactions. The spot transactions
have low ELNS, and the bilateral transactions have high ELNS.
Therefore, the ELNS of L15 in the hybrid market is very high.
The expected reserve dispatched (ERD) from G1, G9, and
G10 is 65.45 MW. The costs for the reserve dispatched by

Gencos G1, G9, and G10 and the costs for the curtailment of
customers L1 to L17 are shown in Fig. 3.
B. Effect of Reserve Bid Price
The impact of reserve bid price on the ELNS of customers
was investigated. The ELNS of customers for the three cases of
reserve bid prices of Table VIII are presented in Table II. The
ELNS of customers L1L6 show high values when their curtailment bids are lower than the reserve bids. Similarly the ELNS
of customers L1L6 show lower values when their curtailment
bids are higher than the reserve bids. The ELNS of customer
L7L17 who have bid higher than the reserve bids do not show
wide variations of ELNS in all the three reserve bid price cases.
C. Effect of Transmission Lines
The impacts of transmission lines on the ELNS of customers
for reserve bids of Case I were investigated and are shown in
Table III.
Three cases of a transmission network were considered. In
Case A, the transmission network was not considered; in Case

GOEL et al.: FRAMEWORK TO IMPLEMENT SUPPLY AND DEMAND SIDE CONTINGENCY MANAGEMENT

TABLE IV
FAILURE RATE DATA OF THE GENERATING UNITS

211

TABLE VI
CURTAILMENT BID DATA IN THE HYBRID MARKET

TABLE VII
ENERGY AND RESERVE UNITS PARTICIPATING IN THE HYBRID MARKET

TABLE V
TRANSACTIONS (MW) IN THE HYBRID MARKET

TABLE VIII
DIFFERENT SET OF RESERVE BIDDING PRICES ($/MW)

B, the transmission lines were considered in load flow calculations; and in Case C, three lines between bus 13 and 23, bus 14
and 16, and bus 16 and 19 were removed. The ELNS of customers for the three cases are shown in Table III. The results
clearly show that transmission outages result in higher ELNS of
customers.
VIII. CONCLUSIONS
This paper proposes a framework to implement supply side
reserve bids and demand side load curtailment bids for contingency management in reliability assessment of restructured
power systems with hybrid market models. The IEEE RTS has
been analyzed to illustrate the proposed technique. The impacts
on customer reliability indexes of factors such as the spot and
bilateral transactions of customers, reserve prices, and transmission constraints have been discussed. The reliability indexes
provide the expected demand curtailed for a particular customer.
The customers can bid for load curtailment more judiciously
based on 1) the reliability indexes and 2) their ability to reduce
or shift the load. The developed framework and the technique
provide a possible tool for the ISO to implement the participation of Gencos and customers in reliability management.

The framework for contingency management is based on

features of a hybrid market structure described in this paper.
The proposed technique can be extended for application to
real power markets, where market structures, system operation,
and administrative rules are more complex. In this paper, it is
assumed that different units will be used in energy and reserve
markets. In this case, the reserve cost will be high, and the
system will be more reliable. It should however be noted that
the proposed technique can be extended to the case where a
unit participates in both the reserve and energy markets. The dc
OPF has been used in the proposed technique. The ac OPF can
be used in real power markets in future studies to provide more
accurate and realistic results.
APPENDIX
Table IV shows the failure rate data of the generating units.
Table V shows the transactions (MW) in the hybrid market,
Table VI shows the curtailment bid data in the hybrid market,
Table VII shows the energy and reserve units participating in
the hybrid market, and Table VIII shows the different set of reserve bidding prices ($/MW).
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Lalit Goel (SM95) was born in New Delhi, India, in 1960. He received the
B.Tech. degree in electrical engineering from the Regional Engineering Col-

lege, Warangal, India, in 1983 and the M.Sc. and Ph.D. degrees in electrical
engineering from the University of Saskatchewan, Saskatoon, SK, Canada, in
1988 and 1991, respectively.
He joined the School of Electrical and Electronic Engineering at the Nanyang
Technological University (NTU), Singapore, in 1991, where he is presently
Head of the Division of Power Engineering.
Dr. Goel received the 1997 and 2002 Teacher of the Year Awards for
the School of Electrical and Electronic Engineering, NTU. He served as
Vice-Chairman of the IEEE Power Engineering Societys Winter Meeting
2000 and as Chairman of the IEEE PES Powercon 2004 conference held
in Singapore. He received the IEEE Power Engineering Society Singapore
Chapter Outstanding Engineer Award in 2000. He is the Regional Editor for
Asia for the International Journal of Electric Power Systems Research and a
Deputy Director at NTUs Protective Technology Research Center (PTRC).

Viswanath P. Aparna received the B.Sc. degree in electrical engineering from

the Osmania University, Hyderabad, India, in 1995 . She is currently pursuing
the Ph.D. degree in the School of Electrical and Electronic Engineering,
Nanyang Technological University, Singapore.
Her research interests are in power system reliability evaluation in a deregulated power market environment.

Peng Wang (M00) received the B.Sc. degree from Xian Jiaotong University,
Xian, China, in 1978, the M.Sc. degree from Taiyuan University of Technology,
Shanxi, China, in 1987, and the M.Sc. and Ph.D. degrees from the University of
Saskatchewan, Saskatoon, SK, Canada, in 1995 and 1998, respectively.
Currently, he is an Associate Professor of Nanyang Technological University,
Singapore.