Module 7 : Power System Structures
Lecture 32 : A vertically integrated utility
Objectives
In this lecture you will learn the following
What is a vertically integrated utility?
What are the conditions that have led to changes in the traditional power system structure ?
Power System Structure
Power systems traditionally have been what are known as "vertically integrated utilities". In this type of structure,
one utility handles the all functions of generation, transmission and distribution within a certain geographical area.
The operation and coordination of such a system is somewhat simple, since all functions are controllable by a
system operator. The operational objectives were to provide quality power (voltage and frequency nearly
constant) to a consumer, while ensuring reliability and overall economy (low cost).The price of power was
"regulated" and based on actual costs.
An alternative is to treat power as a tradeable commodity. The functions of generation and in many cases,
distribution, are open to private participation. While the "technical objectives" are similar to those in a vertically
integrated utility, the price is not regulated, but depends on market forces and competition between the
participants. In a generation deficit scenario, price may still need to be regulated. Alternatively, the amount of loads
should be price sensitive or else prices will spiral upwards. The cost of use of transmission lines (to which all players
will have "open access" subject to the transmission constraints) would also be regulated. Therefore a "regulator"
would still be required. However, a regulator would be an independent body. An independent system operator
would perform the co-ordination functions required to operate the system reliably and ensure that voltage and
frequency are within limits. The real and reactive power resources required to maintain voltage, frequency and
reliability may be "purchased" and charged to all the players in a fair manner.
We shall discuss these structures and their impact on power system operation in the following lectures. We begin by
considering in detail, a vertically integrated utility.
Structure of a traditional Vertically Integrated electric industry
The electric power industry has over the years been dominated by large utilities that had an overall authority over all
activities in generation, transmission and distribution of power within its domain of operation. Such utilities have
often been referred to as vertically integrated utilities. Such utilities served as the only electricity provider in a region
and were obliged to provide electricity to everyone in the region.
The typical structure of a vertically integrated electric utility is shown in figure below. In the figure, the money flow is
unidirectional, i.e. from the consumer to the electric company. Similarly, the information flow exists only between the
generators and the transmission systems.
In vertically integrated utilities , it was often difficult to segregate the costs involved in generation, transmission or
distribution. So, the utilities often charged their customers an average tariff rate depending on their aggregated cost
during a period.
Lecture 32 : A vertically integrated utility
Objectives
In this lecture you will learn the following
What is a vertically integrated utility?
What are the conditions that have led to changes in the traditional power system structure ?
Power System Structure
Power systems traditionally have been what are known as "vertically integrated utilities". In this type of structure,
one utility handles the all functions of generation, transmission and distribution within a certain geographical area.
The operation and coordination of such a system is somewhat simple, since all functions are controllable by a
system operator. The operational objectives were to provide quality power (voltage and frequency nearly
constant) to a consumer, while ensuring reliability and overall economy (low cost).The price of power was
"regulated" and based on actual costs.
An alternative is to treat power as a tradeable commodity. The functions of generation and in many cases,
distribution, are open to private participation. While the "technical objectives" are similar to those in a vertically
integrated utility, the price is not regulated, but depends on market forces and competition between the
participants. In a generation deficit scenario, price may still need to be regulated. Alternatively, the amount of loads
should be price sensitive or else prices will spiral upwards. The cost of use of transmission lines (to which all players
will have "open access" subject to the transmission constraints) would also be regulated. Therefore a "regulator"
would still be required. However, a regulator would be an independent body. An independent system operator
would perform the co-ordination functions required to operate the system reliably and ensure that voltage and
frequency are within limits. The real and reactive power resources required to maintain voltage, frequency and
reliability may be "purchased" and charged to all the players in a fair manner.
We shall discuss these structures and their impact on power system operation in the following lectures. We begin by
considering in detail, a vertically integrated utility.
Structure of a traditional Vertically Integrated electric industry
The electric power industry has over the years been dominated by large utilities that had an overall authority over all
activities in generation, transmission and distribution of power within its domain of operation. Such utilities have
often been referred to as vertically integrated utilities. Such utilities served as the only electricity provider in a region
and were obliged to provide electricity to everyone in the region.
The typical structure of a vertically integrated electric utility is shown in figure below. In the figure, the money flow is
unidirectional, i.e. from the consumer to the electric company. Similarly, the information flow exists only between the
generators and the transmission systems.
In vertically integrated utilities , it was often difficult to segregate the costs involved in generation, transmission or
distribution. So, the utilities often charged their customers an average tariff rate depending on their aggregated cost
during a period.
