Uncertainty considerations in the pool purchase price in the England and Wales electricity supply industry

Abstract

Since 31 March 1990, the new commercial agreements have begun to work as part of the new scheme of privatisation of the electricity supply industry in England and Wales. This privatisation involved the entire reshaping of the industry into a competitive market in generation with final customers able to choose between suppliers of electricity. The transmission and distribution functions are considered monopolies, because it is not economical, and not necessary to duplicate lines, while the generation and energy supply functions have been put into a free market where competition is their main characteristic. The basic commercial mechanism for trading in this market (pool) is the contracts and, on a small scale, the everyday purchases. The prices for all of them are related to the pool purchase price (PPP). The studies presented in this paper review the present England and Wales pool (EWP) approach used to assess the PPP, identifies its weaknesses and proposes solutions. An analytical model is developed in which the uncertainties are modelled and the reliability concept is included. The present EWP approach is identified as one particular case of this general model. The EWP system with 234 units is assessed, the results presented, and conclusions drawn. >