Role and objective of independent system operation
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Role and objective of independent system operation
Answer:The purpose of this report is to increase our understanding of the role that an independent system operator (ISO) will have to play in a restructured electricity industry, if it is to facilitate competition, ensure network reliability, manage transmission congestion, accommodate bilateral contracts, and provide operational support for a spot market. An ISO is an administratively created firm that is charged with the efficient day-to-day operation and control of transmission facilities and assets that are owned by electric-power companies.
An ISO is modeled as a monopolist for the following two reasons. First, a credible technology-based threat to the transmission monopoly does not exist at the moment. Second, free market alternatives to a transmission monopoly are not economically sustainable at present. Both reasons imply that transmission is a source of market power. As a result, a rational electric-power company will not divest itself voluntarily of transmission facilities and assets. Therefore, policymakers throughout the world have ordered the effective divestiture of these facilitie and assets from the other facilities and assets used to produce electricity and electric power.