Insurance Contract for the Transfer of Electrical Energy, an Incentive Method to Improve the Reliability

In competitive electricity market, maximizing the profit is the main objective in company’s decision making. Hence, Transmission companies (Trans Cos) are not interested in improving reliability and expanding existing structures without financial benefits. On the other hand, consumers demand more reliable and high quality power. In this paper, transmission insurance plan is proposed as an incentive method to improve the reliability of electrical power transmission. In this method, an insurance contract concluded between insurance company and every customer. Insurance company spend a part of its revenue to increases the reliability of the transmission system and also pays for compensation of consumers not supplied energies. The proposed method is studied in a network with six buses. Results show that the proposed method increases network reliability.