Microeconomic examination of distribution reliability targets

Electric service reliability is a commodity that can be purchased and sold. In a free market, utilities would behave according to a reliability supply curve and customers would behave according to a reliability demand curve. Market forces would set reliability and price levels where supply equals demand. Distribution reliability, however, is subject to increasing legislation in the form of reliability targets. This paper examines reliability supply and demand characteristics and compares results with reliability targets based on performance based rates, reliability guarantees and differentiated reliability.