For over one hundred years, the electric power industry worldwide operated as a regulated industry. In any area there was only one company or government agency (mostly state-owned) that produced, transmitted, distributed and sold electric power and services. Deregulation Definition concept came in early 1990s. It brought in changes designed to encourage competition.
Restructuring involves dis assembly of the power industry and reassembly into another form or functional organisation. Privatisation started sale by a government of its state-owned electric utility assets, and operating economy, to private companies. In some cases, deregulation was driven by privatization needs. The state wants to sell its electric utility investment and change the rules (deregulation) to make the electric industry more palatable for potential investors, thus raising the price it could expect from the sale. Open access is nothing but a common way for a government to encourage competition in the electric industry and tackle monopoly. The consumer is assured of good quality power supply at competitive price.
The structure for deregulation is evolved in terms of Genco (Generation Company), Transco (Transmission Company) and ISO (Independent System Operator). It is expected that the optimal bidding will help Genco to maximize its payoffs. The consumers are given choice to buy energy from different retail energy suppliers who in turn buy the energy from Genco in a power market. (independent power producer, IPP).
The restructuring of the electricity supply industry that normally accompanies the introduction of competition provides a fertile ground for the growth of embedded generation, i.e. generation that is connected to the distribution system rather than to the transmission system.
The earliest reforms in power industries were initiated in Chile. They were followed by England, the USA, etc. Now India is also implementing the restructuring. Lot of research is needed to clearly understand the power system operation under deregulation. The focus of research is now shifting towards finding the optimal bidding methods which take into account local optimal dispatch, revenue adequacy and market uncertainties.
India has now enacted the Electricity Regulatory Commission’s Act, 1998 and the Electricity (Laws) Amendment Act, 1998. These laws enable setting up of Central Electricity Regulatory Commission (CERC) at central level and State Electricity Regulatory Commissions (SERC) at state level.
The main purpose of CERC is to promote efficiency, economy and competition in bulk electricity supply. Orissa, Haryana, Andhra Pradesh, etc. have started the process of restructuring the power sector in their respective states.