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Effect of demand management on regulated and deregulated electricity sectors


  • Fahrioglu, Murat


Our society derives a quantifiable benefit from electric power. In particular, forced outages or blackouts have enormous consequences on society, one of which is loss of economic surplus. The society relies on having a continuous supply of electrical energy. Some customers may willingly risk this continuous supply and participate in demand management programs for electrical power. If the power system grid is in trouble, electric utilities need to have demand relief. Customers willing to reduce their demand to help the system can receive an incentive fee for helping the utilities. Demand relief can be system wide or location specific. Sometimes it can be more effective to fix the electrical demand vs. supply imbalance from the demand side. The value of demand management contracts is greatly affected by customer location. Inclusion of locational attributes into the contract design procedure increases the effectiveness of the contracts by helping a utility get more value from its demand management programs. Independent System Operators and regulators, among others, can also benefit from effective demand management. This paper will investigate how this type of demand management contracts can help the electricity sector both in regulated and deregulated environments.

Suggested Citation

  • Fahrioglu, Murat, 2016. "Effect of demand management on regulated and deregulated electricity sectors," Energy Policy, Elsevier, vol. 90(C), pages 115-120.
  • Handle: RePEc:eee:enepol:v:90:y:2016:i:c:p:115-120
    DOI: 10.1016/j.enpol.2015.12.018

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    References listed on IDEAS

    1. Hogan, William W, 1992. "Contract Networks for Electric Power Transmission," Journal of Regulatory Economics, Springer, vol. 4(3), pages 211-242, September.
    2. Roger E. Bohn & Michael C. Caramanis & Fred C. Schweppe, 1984. "Optimal Pricing in Electrical Networks over Space and Time," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 360-376, Autumn.
    3. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, May.
    4. Chao, Hung-Po & Peck, Stephen, 1996. "A Market Mechanism for Electric Power Transmission," Journal of Regulatory Economics, Springer, vol. 10(1), pages 25-59, July.
    5. Eric Hirst, 1992. "Price and Cost Impacts of Utility DSM Programs," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 75-90.
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