Homepage for EE/Econ 458 (Tesfatsion)

Economic Systems for
Electric Power Planning

Last Updated: 14 April 2024

Latest Course Offering: Fall 2011
Meeting Time: MWF 11-11:50am
Meeting Place: Marston 205

Syllabus for Dr. Tesfatsion's Class Days
EE 458 Course Structure (McCalley)

Team Instructors:

Dr. Jim McCalley
Department of Electrical & Computer Engineering
ISU, Ames, IA 50011
Office: Coover Hall, Room 1115
Office Tel: 515-294-4844
Secretary Tel: 515-294-8057
jdm AT iastate.edu

Dr. Leigh Tesfatsion
Department of Economics
ISU, Ames, Iowa 50011-1070
Office: Heady Hall, Room 375
tesfatsi AT iastate.edu
Power System Graphic

Instructor Office Hours:
Dr. McCalley:
Wed 1-2, Coover 1115,
      and by appointment
Dr. Tesfatsion:
Wed 3:10-5pm, Heady Hall 375,
      and by appointment

Grading Assistant 1:
Ms. Qihui Qi (EE)
qihui AT iastate.edu

Grading Assistant 2:
Mr. Dong-Jin Pyo (Economics)
Office/Tel: Heady Hall 280B, 4-5888
Office Hours: Monday 3:10-5,
      and by appointment
djpyo AT iastate.edu

Syllabus for Dr. Tesfatsion's Class Days
EE 458 Course Materials: Latest Version (Dr. McCalley)
General Resources on Electricity Restructuring
Course Objectives
Topic Outline and Tentative Schedule
Structure (grade policy, exam policy, etc.)
Disability Statement

Course Objectives

Electric power systems around the world are currently undergoing substantial changes in their structure and rules of operation. This process has come to be referred to as restructuring.

For example, prior to 1990 most electricity in the U.S. was supplied by vertically integrated utilities operating under a regulatory compact whereby they agreed to provide an adequate supply of electricity for all users in return for receiving a fair rate of return on their capacity. In contrast, over 50% of generating capacity in the U.S. is now operating under a centrally administered wholesale power market in which electricity is priced in accordance with the location and timing of its injection into and withdrawal from the transmission grid.

Debates and controversy continue with regard to the exact form that restructured electric power systems should take. At the national level, regulatory agencies (such as the U.S. Federal Energy Regulatory Commission) are in the process of revising the entire regulatory framework within which electric power systems operate, with fiduciary responsibility for protecting against risks to national security. At the regional level, system operators are devising and implementing new rules of operation in an attempt to ensure reliability as well as efficiency and fairness. At the level of participant traders, companies are developing new strategies for the purchase and sale of energy and securement of ancillary services in an attempt to enhance their net earnings while protecting against financial and operational risks.

Some commentators continue to argue that this restructuring process has not produced the intended improvements in system efficiency while at the same time it has complicated efforts to ensure the reliability of system operations and the efforts of traders to protect themselves against financial risks. Given the extraordinary global financial crisis that has recently taken place, it seems inevitable that calls will strengthen for a return to heavier regulation of power systems.

This course will cover topics essential for understanding key issues currently surrounding the restructuring of electric power systems both here in the U.S. and abroad. The specific course goals are to enable each student to:

Topic Outline and Tentative Schedule

  1. Historical Background and Course Overview (JM/LT)
  2. Microeconomic Basics for Power Systems
    1. Modeling of Generator Costs (JM)
    2. Market Demand/Supply Basics (LT)
    3. Theory of the Competitive Firm (LT)
    4. Introduction to Constrained Optimization (LT)
  3. Linear Programming and Application to Optimal Power Flow (JM)
  4. Integer Programming and Application to Security Constrained Unit Commitment (JM)
  5. Operation of Electric Power Markets (LT)
    1. Game Aspects of Power Systems
    2. Organization of Power Markets
    3. Power Market Trading Subject to Transmission Constraints
    4. Real-World Examples: Policy Concerns
  6. Financial Risk Management for Power Systems (LT)
    1. Markets, Risks, and Risk-Hedging Contracts
    2. Financial Risk Management: Basic Concepts

    MIDTERM EXAM 1: Monday, September 19th
    (regular class room and time)

    MIDTERM EXAM 2: Wednesday, November 2nd
    (regular class room and time)

    Tuesday, December 13, 9:45-11:45am (regular classroom)

Course Structure

Credits and Prerequisites

Required Student Materials:

Class Attendance:

You are strongly encouraged to attend and participate in class, but role will not be called. However, YOU ARE RESPONSIBLE FOR ALL INFORMATION PRESENTED IN CLASS. The websites, instructors, and graders, although available to you, are not responsible for providing you with in-class information if you choose not to attend class.

Take-Home Exercise Assignments (Tesfatsion):



Your overall course grade will be computed on a pro-rated point basis as follows

Letter grades will be determined according to the following guidelines


Feel free to contact the instructors during their office hours, class meetings, or through email if you have any questions or concerns. At the start of classes a mailing list will be established for use by all class participants (including the instructors and grading assistants).

Disability Statement:

If you have a disability and require accommodations, please contact the instructor early in the semester so that your learning needs may be appropriately met. You will need to provide documentation of your disability to the Disability Resources (DR) office, located on the main floor of the Student Services Building, Room 1076, 515-294-7220.