Cubic reward penalty structure for power distribution companies

An important significance of restructuring in power industry is the emergence of regulatory performance indices in the power distribution companies. Reward-penalty scheme is a direct control method that regulators use to assure the performance regulatory controls such as system reliability, service efficiency, and customer interruption cost. It is used as a financial tool designed to prevent the service reliability and efficiency deterioration of power distribution companies. Reward penalty scheme rewards the distribution company which provides good reliable power and penalizes those who act otherwise. In this paper, we propose a Cubic Reward-Penalty scheme, to improve the service reliability of power distribution companies. The novel feature of this scheme is the use of cubic reward/penalty formulation which varies in a cubic fashion based on the behavior of the performance-based reliability. In this paper, two methods of implementing Cubic Reward-Penalty scheme are explained: CRPS with no dead band and no reward/penalty capping and CRPS with dead band and reward/penalty capping. These proposed approaches are mainly intended for the regulators who are concerned about the customers affected by the outage duration. The significance of this research, lies in encouraging power distribution companies, to maintain, or even improve, customer service and satisfaction, by developing the Performance Regulatory Reward-Penalty schemes. This paper also provides most of the requirements and design rationale of Cubic Reward-Penalty Structure, its theoretical foundation and its prototype implementation.