Abstract

In this paper, we extend the Chilean power generation pricing mechanism, with capacity and energy payments, to one where ancillary services (AS), as frequency regulation and voltage control, are explicitly recognized. Adequacy and security attributes of the electric system and the public good characteristics of AS are set within the payment structure to distribute the financing of AS among those who benefit from their provision. The contribution to finance the provision of AS is determined assessing the value assigned to the system security by each agent, following what's an efficient pricing mechanism in the presence of public goods. © 2008 Elsevier Ltd. All rights reserved.