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One of the most important Distribution System Operators (DSO) schemes addresses the Volt/Var control (VVC) problem. Developing a cost-based reactive power dispatch model for distribution systems, in which the reactive powers are appropriately priced, can motivate Distributed Energy Resources (DERs) to participate actively in VVC. In this paper, new reactive power cost models for DERs, including synchronous  machine-based DGs and wind turbines (WTs), are formulated based on their capability curves. To address VVC in the context of competitive electricity markets in distribution systems, first, in a day-ahead active power market, the initial active power dispatch of generation units is estimated considering environmental and economic aspects. Based on the results of the initial active power dispatch, the proposed VVC model is executed to optimally allocate reactive power support among all providers. Another novelty of this paper lies in the pricing scheme that rewards transformers and capacitors for tap and step changing, respectively, while incorporating the reactive power dispatch model. A Benders decomposition algorithm is employed as a solution method to solve the proposed reactive power dispatch, which is a mixed integer non-linear programming (MINLP) problem. Finally, a typical  22-bus distribution network is used to verify the efficiency of the proposed method

A New Approach to Optimal Allocation of Reactive Power Ancillary Service in Distribution Systems in the Presence of Distributed Energy Resources