8313 Berg Power Factors And

7/27/2019 8313 Berg Power Factors And

1/18

Power Facto rs and theEf f i c i en t Pric ing and Product ionof React ive Power

by Sanford V. Berg*

with the a ss is ta nc e o fJim Adams

and Bob Niekum**October 25, 1982

*Associa-te Professor o f Economics and Execut ive Director ,P u b l i ~ u t i l i t y Research Cente r , Universi ty o f F lo rid a.--- -..

**Research Assoc ia tes , PURC. Departments o f Nuclear Engineer ing and Elec t r i c a l Engineer ing, r espec t ive ly .The views e xp re ss ed h er e are so le ly those of the au thors ,not of sponsor ing organ iza t ions . P ro fe ssor Robert L.Sul l ivan , Department o f Elec t r i c a l Engineer ing, providedhe lp fu l comments on an ea r l i e r vers ion o f t h i s mater ia l .


2/18

ABSTRACT

Power Facto rs and th eEf f i c i en t Pric ing and Product ion o f React ive Power

Most e l e c t r i c i t y pr ice schedules p en aliz e la rg e indus -t r i a l customers fo r low power f ac to r s . Not to be confusedwith the load f ac to r ( re l a t ing average to peak KW demand) ,th e power f ac to r r e f l ec t s th e impact o f r eac t ive power (mea-sured in k i l o v o l t ~ a m p e r e s - r e a c t i v e ) on e l e c t r i c a l systems:two loads with th e same p at te rn o f KW demand and KWH energyconsumption can have d i f f e r e n t im p lic at io ns f or e l e c t r i c a lcur ren t requ i rements . This note i den t i f i e s the r e levan tcos t -o f -se rv ice is sues fo r power fac to r . ad jus tment s , descr ibeshow i ndus t r i a l customers are charged fo r r eac t ive power, andsuggests t h a t presen t p r ic ing prac t i ces be re-examined s inceindus t ry norms have evolved out s ide a cos t -bene f i t framework.


3/18

Power F a c t o r s and t h eE f f i c i e n t P r i c i n g and Product ion o f React ive PowerOur u n d e r s t a n d i n g o f t h e e f f i c i e n t p r i c i n g o f e i e c t r i c i t y

has improved i n r e c e n t y e a r s as u t i l i t i e s and r e g u l a t o r s exam-i n e d t h e i m p l i c a t i o n s o f p r i c e s i g n a l s f o r customers . One neg-l e c t e d a r e a i s t h e s o - c a l l e d "power f a c t o r adjustment" f o rl a r g e i n d u s t r i a l customers found i n most e l e c t r i c i t y p r i c es c h e d u l e s . This n o t e i d e n t i f i e s t h e r e l e v a n t c o s t - o f - s e r v i c ei s s u e s , d e s c r i b e s how e l e c t r i c u t i l i t i e s t e n d t o charge c u s -tomers f o r c o s t s i n c u r r e d i n d e a l i n g w i t h t h e power f a c t o rproblem, and s u g g e s t s t h e need f o r changes i n p r e s e n t p r i c i n gp r a c t i c e s .

React ive PowerOne reason so little a t t e n t i o n has been given t o r e a c t i v e

power i s t h e i n h e r e n t d i f f i c u l t y i n u n d e r s t a n d i n g t h e c o n c e p t .A t e c h n i c a l d i s c u s s i o n o f t h e phenomenon o f r e a c t i v e poweri n v o l v e s r e f e r e n c e t o r e s i s t i v e and i n d u c t i v e l o a d s , c a pa ci -t o r s and i n d u c t o r s , and k i l o v o l t amperes . The e c o n o m i s t ' seyes g l a z e o v e r and he (o r she) t u r n s t o o t h e r , moreC"::pressing,probl-ems. The complexi ty o f an e l e c t r i c a l system gOQ-s beyondt h e know ledge (and i n t e r e s t ) o f most economists . So r a t ed e s i g n e r s a r e l e f t alone t o d e a l w i t h t h e f a c t t h a t two l o a d sp l a c e d on t h e system i n v o l v i n g t h e same k i l o w a t t (KW) demandand k i l o w a t t hour(KWH) energy consumption can have d i f f e r e n t


4/18

-2 -

i m p l i c a t i o n s f o r t h e e l e c t r i c a l c u r r e n t r e q u i r e m e n t s . Wea r e f a m i l i a r with t h e KWH energy c h a r g e , and unders tand t h a ti n d u s t r i a l customers a r e a l s o b i l l e d f o r t h e maximum i n s t a n taneous KW demand, b u t t h e presence o f a n o t h e r charge f o r alow power f a c t o r ( a f f e c t i n g e l e c t r i c a l c u r r e n t r e q u i r ~ m e n t s )i s n o t - w i d e l y known. -

The impact o f d i f f e r e n t t y p e s o f e l e c t r i c a l l o a d s can bei l l u s t r a t e d by n o t i n g t h a t a r e s i s t i v e l o a d (such as a l i g h tbulb o r an e l e c t r i c h e a t s t r i p ) does n o t a f f e c t t h e r e l a t i o n s h i p between. t h e e l e c t r i c a l c u r r e n t and t h e v o lt a g e i n ana l t e r n a t i n g c u r r e n t (AC) power sys tem. The c u r r e n t remains i nphase w i t h t h e v o l t a g e . However, if t h e v o l t a g e were a p p l i e dt o a p u r e l y i n d u c t i v e l o a d (such a s an unloaded t r a n s f o r m e r ) ,t h e o u t p u t c u r r e n t would l a g o r fol low t h e o u t p u t v o l t a g e .Such a c i r c u i t would "consume" only r e a c t i v e pow er (m easu redi n k i l o v o l t ampere reactive--KVAR). The p h y s i c a l r e l a t i o n s h i p s i n an e l e c t r i c a l system imply t h a t as more r e a c t i v epower i s consumed, l e s s r e a l pow er (m ea su re d i n KW) can beproduced by t h e u n i t g e n e r a t i n g t h e e l e c t r i c i t y .

The r e l a t i o n s h i p between r e a l power (KW) and r e a c t i v epower (KVAR) can be d e p i c t e d i n terms o f a p r o d u c t i o n p o s s i b i l i t i e s - f r o n t i e r r e l a t i n g t h e two. Figure 1 shows tile t e c h n i c a l - " t . r a d e - o f f between KWs and KVARs. The name pla"te c a p a c i t yo f a g e n e r a t i n g u n i t i s i n k i l o v o l t amperes (KVA) , which wouldbe n u m e r i c a l l y e q u iv a l e n t t o KW if no r e a c t i v e power wereproduced . However, a s more r e a c t i v e power i s produced t o


5/18

ReactivePower

KVAR

20000.....__ ..... . . . ..... Real

KW Power

100

200

. ~ . , . , -:- ..-igure I' . , - , , "" ,The Power Factor (Cos 0> and Reactive Power


6/18

-3 -

serve in du ct iv e l oa ds , l e s s re a l power (KW) can be produced byth e g en era to r with a given KVA r a t i ng . The product ion poss i -b i l i t i e s f ron t i e r i s a c i r c l e , where th e quan t i ty cosine 8 i sca l l ed th e power fac to r o f th e load. l The r e s i s t i ve load froml i g h t bu l b s i s such t h a t 8 i s zero , so the power factoT i suni ty . On the o the r hand, if the load were pure ly i nduc t ive ,th e power f ac to r would be zero . Thus , if th e u t i l i t y meteredthe average va lue o f i ns ta nta ne ou s power (KW) , t h i s number would be

z e r o - . S i m i ~ a r l y , z ; e r o KWH,wou1dhemeasured fo r a purfiely i ndac t i ve load .Systems planners and des igners o f e l e c t r i c a l systems can

con tro l fo r the excess cu r r en t caused by induc t ive elements byadding_ dev ices ca l l ed capac i to r s a long th e cab le run. Capaci to rse s sen t i a l l y produce KVARs, so they can compensate fo r the reduc-t i on in KW capac i ty ava i lab le to serve o the r customers whichwould otherwise occur when induc t ive loads dominate th e sys tem.Thus , th e re are a t l e a s t two ways to main ta in r e a l capac i ty ascustomers demand more r eac t ive power (causing an inc rease in 8 ).One way i s to add capac i to r s and ano ther i s to add capac i ty . 2Ignor ing fo r now o th er b e ne fi ts from such addi t ions (improved

I I f C = capac i ty , then r e a l pOvler = C(cos B) and r eac t ivepower = ( s i n 8 ) . The product ion pos s i b i l i t i e s c i r c l ~ - h a s th eform r e a l power squared plus r eac t ive power squared i s equalto the-'-square o f th e c ap ac ity .

2A promising new device which can p rodu ce o r consume reac t i ve power i s the s t a t i c va r compensator . The ava i l ab i l i t y ofnew technologies fu r the r compl ica tes th e cho ices facing u t i l i t i e s .


7/18

-4 -

system s t ab i l i t y , th e c oun te ra ctio n o f vol tage problems, andinc reased system r e l i a b i l i t y ) , cost-minimizing systems plannerswi l l add devices o r capac i ty , depending on which i s more economical .

Figure 2 i l l u s t r a t e s how a drop in the power f ac to r due toincreased consumption of reac t ive power (KVARs) can be compensa ted fo r by an expansion in genera t ing capac i ty . I n i t i a l l y ,there i s KWOin capac i ty , with KWO of r e a l power being de l ive red ,given a power fac tor o f cos 80. Now, if a change in the mix ofe l e c t r i c a l loads caused a drop in th e power f a c t o r to cos 81 ,the r e a l power that . could be de l ive red with th e ex i s t ing generat ing system drops to KWB, as the system moves from A to B. I fthe r e a l power d e m a n d ~ d remains a t KWO (and r e l ia b il i ty i s tobe held cons tan t ) , then th e i n s t a l l a t i on o f capac i ty ( sh i f t ingout the produc t ion poss ib i l i t y f ron t i e r ) equ iva len t to KWi - KWOpermi t s po in t C to be a t t a ined .

Rate des igners who wish e f f i c i en t p ric e s ig na ls and equ i -t ab le shar ing o f cos t burdens wi l l include some pena l ty fo rthose who impose added cos t s onto th e system. The power f ac to radjustment i s j u s t such a s ign a l to la rge i ndus t r i a l customers .The ques t ion t h a t a r i ses i s the sever i ty o f the pena l ty , which(from th e s ta nd po in t o f economic ef f ic iency) ought to r e f l e c tth e c o s ~ s - o f coping with t h i s aspec t o f e l e c t r i c i t y d e ~ i v e r ysystems-: Too g rea t a pena l ty could r e su l t in custome'rs pur-chas ing expensive machinery and modifying p roduc ti on t ec hn iqu esunnecessar i ly . Too I owa charge would cau se under inve stmen t bycustomers , and over inves tment by th e e lec t r i c u t i l i t y fo r dea l -in g with the problem. I f one c on sid ers th e po ten t i a l resource


8/18

KVAR

Power Factor =Cos e-'" , COSecrCOsel" "

",

Figure 2Capacity Expansion in Response to a Reduction inthe Power Factor


9/18

-5 -

misa l loca t ions from th e s tandpo in t o f th e na t ion as a whole ,then ca r e fu l ana lys i s o f proper s igna l s warrants much morea t t en t ion than it has rece ived in th e pas t . 3

I l l u s t r a t i v e Pr ic ing Pol ic iesA ~ t u a l ra t e schedules from four u t i l i t i e s wi l l b ~ used to

i l l u s t r a t e d i f f e r en t ways u t i l i t i e s dea l with th e power f ac to rproblem. One would hope to f ind some cons i s t ency in the wayregula tors allow th e co sts imposed by low power f ac to r s to ber e f l e c t ed in pena l t i e s . However, two o f th e u t i l i t i e s fromNorth Carol ina are a ll owed comp le te ly d i f f e r en t ways o f de t e r -mining th e power f ac to r pena l ty . A Flor ida u t i l i t y i s used toi l l u s t r a t e how grada t ions can be achieved in dea l ing with r e l a -t i v e l y l ow power fac to rs , whi le a Cal i fo rn ia company serves asan example o f how to le ra nc es fo r low power f ac to r s d i f f e r acrossj u r i sd i c t i ons .

Of course , what i s on th e "books" as th e ra te schedule andwhat pena l t i e s a re ac tua l l y imposed are two d i f f e r en t i tems a l -t oge the r . These adjustments in th e ra te sc he du le te nd to leavemuch to the d i sc re t ion o f th e company. A t yp i ca l c lause fromFlor ida Power Corporat ion s t a t e s :

Where the customer i s found to have a power fact.oro i ~ less than 8 5 % ~ the Company m a y ~ a t i t s o p t i o n ~ -

~ ~ a s u r e the monthly demand in K V A ~ in which c a s ~ ~the KW demand for h i l l ing. purposes sha l l he 85% o fthe measured KVA. [Emphasis added.]

3As Sul l ivan (1982) notes in h is review o f th e i s sue s ,"[ Induc t ion motors] a re used in most app l iances as wel l as ina var i e ty o f la rge mining ac t iv i t i e s . Problems l i ke poor powerf a c t o r , vol tage f l i cke r , [and] high inrush cur ren t s , can usua l lybe t r aced to the s t a r t i ng and s topping o f l a rge induc t ionmachines" (p. 11) .


10/18

-6 -Note t h a t the opera t ive c la use leav es th e i n i t i a t i v e up to thee l e c t r i c u t i l i t y to f ind cus tomers with low power fac to rs andi n s t a l l measurement devices . It may wel l be t h a t such c lausesin th e ra t e schedule (which amounts to a cont rac t ) merely givesome l everage fo r dea l ing with po t en t i a l prob lems--as nego t i a -t ions wi th la rg e cus tomers i ron ou t d i f f i cu l t i e s . An_ i nves -t i g a t i on o f p en al t ie s a ctu al ly imposed wou ld provide mportantin fo rmat ion abou t power f ac to r p en al t ie s in p rac t i c e . Fur the r -more, u t i l i t y - i n i t i a t ed discuss ions with l a rge power consumerswould have to be i d en t i f i ed in any such s tudy o f th e imple-mentat ion o f t h i s component o f th e ra t e schedu le .

The two opposing cos t ing phi losophies are i l l u s t r a t ed byCaro l ina Power & Ligh t and Duke Power. The former uses 85% asth e t r i gge r fo r pena l t i e s , but th e r eac t ive power f ac to r ad -ju s tmen t i s based on th e cos t s o f providing capac i to r s to br ingth e power fac to r to 85% o r grea te r . Thus, the cus tomer hasth e op tion o f i n s t a l l i ng h is own capac i to r s , ad jus t ing h isequipment to reduce r eac t ive power consumption, o r paying apena l ty . Figure 3 i l l u s t r a t e s how capac i to r s a f f e c t th e pro-duct ion pos s ib i l i t y f ron t i e r r e l a t i ng KVARs and KWs. As ana l t e rna t i v e to ad din g 2 3.8 KVA (141.4 - 117.6) o f capac i ty tomeet th e reduc t ion in the power f ac to r from 0.85 to 0.717,capac i tQ. rscould be i n s t a l l ed , so th e r eac t ive power'o.emand o f100 KVAR (up from 62 KVAR) can be met withou t reducing-- KW ou t -put . The add i t iona l 38 KVAR o f r eac t ive power capab i l i t i e s can becharacterized as an outward shi f t in the production possibili ty f rontier .

40ne could argue t h a t a pa r t i c u l a r demander ' s change inbehav ior (caus ing a drop in its power fac tor ) i s only pa r t i a l l yr e spons ib le fo r the need fo r an add i t i ona l 38 KVAR in capab i l i t i e s ;the cont inued ins tantaneous demand o f 100 KW a l so requi res KVARcapab i l i t i e s . Thus, KW o r KWH charges ought to r e f l e c t some cos tre spons ib i l i t y .


11/18

KVAR

al = ~ 8 e =45 02

I141.4-

Addition of~ ~ - 3 8 KVAReQu ivalent viacapacitors

117.600

cos a l =0.85cos 92 =0.717

62

100

Figure 3Addition of Capacitors in Response to a Drop in

the Power Factor


12/18

-7 -

The pa r t i cu l a r b i l l i ng algori thm used by Carol ina Power& Ligh t t akes customers with a power fac to r o f l e s s than 85%and ca l cu l a t e s th e adjus tment by mu ltip ly in g th e di f fe rencebetween th e maximum KVAR and 62% o f th e maximum KW demand r eg i s t e red in th e cur ren t b i l l i ng month by $0.25. A custOIRer withan 85%-power f ac to r and a maximum demand o f 100 KW would havea r eac t ive power demand o f 62 (a t po in t A in Figure 3 ) . A dropin th e power f ac to r to 71.7% would invo lve a maximum KVAR r ead ing o f 100 a t poin t C. Mult ip ly ing 0.62 t imes th e maximum KWread ing o f 100 and sub t rac t ing t h i s from th e maximum KVAR reading (100), y ie lds 38. The a d d it io n a l r ea c ti ve power r equ i re ments would r e s u l t in an add i t iona l monthly cos t to th e customero f $9.50 ($0.25 x 38) .

Duke Power has th e same power f ac to r t r i gge r poin t o f 85%,but the b i l l i ng algori thm i s qu i te d i f f e r en t : "The t o t a l KWHfo r th e month i s mul t ip l i ed by 85% and div ided by th e averagepower f ac to r fo r t h a t month fo r ad jus tment purpose . ,,4 In te rmso f Figure 3, a decrease in th e power f ac to r from 85% to 71.7%,with a cons tan t r e a l power demand o f 100 KW w il l r e su lt in aninc rease in r eac t ive power load from 62 KVAR to 100 KVAR.Tota l monthly KWH consumption i s mul t ip l i ed by 1.185 to obta inth e power f ac to r pena l ty . I f th e Duke Power customer- had aload f ac to r o f one , it would consume 2400 KWH pe r day:" At5/KWH, th e monthly bi- l l would jump from $3600 to $4266: a

4nuke Powe.r Schedu le- l (NC) , Indus t r i a l Serv ice , December1978.


13/18

-8 -

pena l ty o f $666--compared with $9.50 fo r Caro l ina Power &Ligh t ' s customer . A 3/KWH ra te would still y ie ld a $400pena l ty : for ty t imes the CP&L pena l ty . Both compani esa re re gu la te d by the same commission.

Duke does not cons ider add i t iona l capac i to r s as the cos to f moving from A to C, r a t he r th e u t i l i t y seems to be chargingfo r the ex t r a gene ra to r c a pa c it y needed to move from B to C:a l loca ted over KWH consumption. The dis tance BC i s equal toHI, and represents add i t iona l capac i ty cos t s (23.8 KVA).However, the Duke pr ic ing algori thm i s i n cons i s t en t with t r e a t -ing c apa ci ty a dd it io n s as the response to drops in the powerf ac to r . Since th e charge i s app l i ed on the bas is o f t o t a lKWH, only so long as the c us tome r h as a load f ac to r ( ra t ioo f peak KW demand to average KW demand) o f un i ty , does th eadjus tment to the b i l l r e f l e c t th i s approach in a cons i s t en tfashion. For ex ample , if th e customer has a load f ac to r o f ,say 0 .80 , then its peak demand i s I 2 ~ % grea te r than i t s aver-age KW. Adjust ing the b i l l on the bas is o f t o t a l KWH wi l lu nd ers ta te th e "capac i ty cos t impact" o f increased r eac t ivepower consumpt ion--especial ly s ince the problem tends to beg rea t e s t dur ing per iods o f peak demand.-Economic pr inc ip les support a pr ic ing approach t h a t haspr ice r e f l e c t marginal cos t s . A case can be made t h a t th eoppor tun i ty cos t o f producing r eac t ive power i s the cos t o fc a pa c it or a dd it io n , r a t he r than capac i ty add i t ion . Not only


14/18

-9 -

i s th e comparable device l e s s expens ive , bu t l i ne l os se s (dueto higher cu r r en t requ i remen ts fo r low power fac tors ) a re cu t .Thus, the i n s t a l l a t i on o f c ap ac ito rs becomes even more economica l as th e power f ac to r dec reases , s ince such an inves tmentreduces th e tr an sm i ss io n l os se s in th e e l e c t r i c a l dis- t=r ibutionsystem in ques t ion . Of c ou rs e, v olta ge con t ro l , s y s t ~ m s t a b i l i t y and gene ra to r des ign op t ions wi l l also a f f e c t th e ap ....'propr ia te inves tment .

The power f ac to r ad jus tment can be used to provide anin ce nt iv e fo r improving a cus tomer ' s power f ac to r . Flor idaPower Corpora t ion ' s r a t e schedule fo r l a rge genera l se rv icedemanC!:ers s t a t e s t h a t "When th e power f ac to r a t th e t ime o fth e h ig hes t measured 3D-minute i n t e rva l KW demand i s g rea t e rthan 85%, then fo r each 1% inc rease in th e power f ac to r above85% th e measured KW demand s ha l l be reduced by 0.5%." In t h i scase th e reward fo r high power f ac to r s i s based on avoided KWcapac i ty cos t s (presumably a t an embedded h i s t o r i c a l cos t ) .The u t i l i t y and th e i ndus t r i a l customer s p l i t th e ca lcu la tedsav ings and the demand charge i s reduced.

In con tra s t to th e a lgor i thms discussed so fa r , th i sscheme avoids th e d is co n ti nu it y o f using some magic t a rge tpo in t tts pena l ize poor performance (in terms o f re ac tiv epower consumption) withou t rewarding improvements . Such ani ncen t ive s t ruc tu re i s good economics. Whether th e incen t ivel eve l i s appropr ia te depends on whether capac i to r s o r capac i ty


15/18

-10-

re pr es en ts th e co r r e c t investment fo r KVAR produc t ion . I fthe former are appropr ia te , th e FPC over-rewards high powerf ac to r s . Also , th e a pp ro pria te l eve l should r e f l e c t marginalcos t today , no t some measure o f undeprec ia ted investment indev ices o r capac i ty .

The Flo r ida Power Corpora t ion (FPC) phi losophy i s s im i l a rto Duke Power, bu t in s tead o f ad jus t ing the b i l l in terms o ft o t a l KWH, the KW demand fo r b i l l i ng purposes i s taken to be85% o f the measured KVA. Thus, if the cus tomer i n i t i a l l y hada power fa c to r o f 0.85 , with a maximum ins tan taneous demand o f100 KW, and the power fac tor dropped to 0.717 (as in Figure 3 ) ,then the measured KVA would r i s e from 117.6 KVA to 141.4 KVA.The demand charge would be app l i ed to 85% o f 141.4 o r 120.2 KW( ins tead o f to 100 KW). The ca lcu la ted i nc rease in genera t ingcapac i ty to meet th e reduct ion in power f ac to r i s 20.2 KVA.for FPC.compared wi th a 23. 8 KVA i nc rease impl ied by th e reduc t ionin power f ac to r . When th e load f ac to r is l e s s than one , th eDuke ad jus tment approaches the FPC formula . Never theless ,the two adjus tment techniques i l l u s t r a t e how even s imi l a rpr inc ip l e s can yie ld d i f f e ren t s i gna l s , depending on the spec i f i cpenal ty a lgor i thm and whether it i s appl ied to KW o r KWH.

And'ther example o f how th e power f a c to r can come i n t oplay i s with i n t e r r up t i b l e and c u rt ai la b 1e s e rv i ce . "For FPC,both these cus tomer c lasses a re p en aliz ed fo r power f ac to r so f l e s s than 85%. In a dd it io n, fo r i n t e r r up t i b l e customers ,th e non- fue l po rt io n o f the energy and demand charge (per KWH)


16/18

-11-

i s to be reduced by 0.5% fo r each 1% inc rease in average powerfac to r above 85%. Peak power f ac to r s might be a b e tte r ta rg e t,s ince assOcia ted oppor tuni ty co s ts o f KVAR product ion a rer e l a t i ve ly g rea t e r during peak per iods . For cur t a i l ab l e cus -tomers (who reduce loads a t the u t i l i t y ' s reques t ) , the measured KW demand . is reduced as th e power f ac to r i n c r e a ~ ~ s above85%. Note t h a t s ince KVARs c on tr ib ute to l i ne l o sses , improve-ments in power f ac to r s y ie ld a product ion bene f i t (due to fue lsavings) as wel l asa capac i ty (or capaci tor>. c red i t .

A Cal i fo rn ia u t i l i t y has a d if fe re n t t ar ge t po in t fo rthe power f a c t o r : San Diego Gas and Elec t r ic s ta te s th at ifth e KVAR demand exceeds 75% o f the KW demand, the customer wi l lrece ive a wri t t en no t ice to i n s t a l l compensating equipment .The associa ted power fac to r t r i gge r po in t i s l e s s t i gh t thanthe three noted so ar because , as can be seen in Figure 3,th e 85% power fac to r has assoc ia ted with it a KVAR demand of62 when KW i s 100. Thus, fo r San Diego Gas and Elec t r i c , KVARcould exceed 62 fo r 100 KW, without the customer incur r ing apena l ty .

The i n t e r e s t i ng economic i s sue i s how to determine thet r i gge r po in t . I f a l l o f San Diego ' s customers have r e l a -t i ve ly row power f a c t o r s , the equ ity o f t o l e r a t i ng low power

. . . :- -f ac to r s may no t be c al le d in to ques t ion . Yet the prJ.:ce s igna lfo r e f f i c i ency may be inappropr ia te if th e o the r u t i l i t i e s areco r rec t in t h e i r choice o f 0.85. Our guess i s t h a t , l ike theindus t ry s tandard o f one day in ten yea r lo ss o f load prob-


17/18

- 1 2 -

a b i l i t y f o r system r e l i a b i l i t y e v a l u a t i o n , t h e c h o i c e o f a0.85 power f a c t o r r e f l e c t s h i s t o r i c a l a c c i d e n t and a con-v e n ie n t f o c a l p o i n t f o r e n g i n e e r s . The " s t a n d a r d " (developedo v e r seventy y e a r s ago) i n v o l v e s compromises r e f l e c t i n g c o s t sand m a t e r i a l c o n s t r a i n t s a t t h a t t i m e . However, g i v e n t h eh i g h c o s t o f a d d i t i o n a l i n v e s t m e n t s by e l e c t r i c u t i l i t i e st o d a y , r e g u l a t o r s and u t i l i t y managers ought t o be d e r i v i n gp r i c e s from economic p r i n c i p l e s t h a t r e f l e c t t o d a y 's t e c h -n o l o g i c a l c o n s t r a i n t s .

ConclusionsThe d e t a i l e d e n g i n e e r i n g r e a l i t i e s o f e l e c t r i c u t i l i t y

systems a r e beyond t h e u n d e r s t a n d i n g o f most r e g u l a t o r s andmanagers . However, t h e t e c h n o l o g ic a l t r a d e - o f f between p r o -ducing r e a l power ( K ~ ' V ) and r e a c t i v e power (KVAR) i s n o t sucha s o p h i s t i c a t e d n o t i o n t h a t a s p e c t s o f r a t e d e s i g n can be l e f tt o i n d u s t r y norms t h a t have evolved o u t s i d e a c o s t - b e n e f i tframework. The f o u r i l l u s t r a t i v e s c h e d u l e s r e v e a l e d somecommonal i t ies , b u t t h e y a l s o have some v e r y d i f f e r e n t approachest o p e n a l i z i n g customers w i t h heavy i n d u c t i v e l o a d s (and lowpower f a c t o r s ) .

The r e a s o n f o r r e a c t i v e power p r i c i n g i s t h a t l a r g e KVARc u s t o m ~ r s may have r e l a t i v e l y low measured KW demand and KWH

...... ~

consumption. P r e s e n t p e n a l t i e s r e f l e c t d i v e r g e n t c o s t i n gp h i l o s o p h i e s . The u t i l i t y i n d u s t r y i s o n l y b e g in n i n g t or e c o g n i z e t h e importance o f KVAR p r o d u c t i o n and consumpt ion--


18/18

-13-

by customers and by the u t il it y i ts e lf . The l a t t e r stem fromt ransmiss ion losses and system cha rac te r i s t i c s . For e xamp le ,how does e l e c t r i c u t i l i t y X deal with a neighbor ing u t i l i t ywho i s no t compensat ing X fo r supplying KVARs? In terconnectedsystems r a i se complex p ric in g is su e s.

Furthermore, the KVAR problem r e in fo rces the argumentsfo r peak load pr i c ing . During per iods of heavy l oad , theret ends to be inadequate VAR product ion , so vol tage sags andcapaci tors must be switched in . When th e load i s l i gh t ,vol tage r i s e s , capac i to r s are switched o f f and reac tors mayby switched in to consume VARs. The r e la ted problems ofsysteII! design and customer incen t ives have no t been exploredby analys t s . It i s t ime fo r c ompanie s and r egu la to r s tofocus much more ca re fu l ly on pr inc ip l e s o f r a te design inar r iv ing a t r a te schedules which l ead to equ i t ab le cos t -shar ing and e f f i c i e n t pr i ce s igna l s .

ReferencesSu l l ivan , "React ive Power Planning and Cont ro l , " ReportUnivers i ty o f Flo r ida cont rac t No. 124505143, September15 , 1982 .

.. ~

Documents

8313 Berg Power Factors And