Abstract--Payment for reactive power services is a part of generator revenue in most established electricity markets today. However such payments do not have a sound technical basis, the critical role that dynamic sources of reactive power play in maintaining voltage stability of the power system must be taken into account. This paper proposes a new method for valuation of Reactive power in restructured power system. This method uses four important factors to determine the importance of Reactive power compensation from one source in network and then calculates payments to the sources according to their importance in power system. These four important factors are: Voltages Sensitivities, Voltage Adequacy and Stability, Equivalent Reactive Compensation (ERC) and Back-up generation. In this paper we use AHP method to classify the Reactive power sources according to their importance in power system. The effectiveness of the proposed method is verified under IEEE 9-bus system.

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