Pricing of transmission services: An efficient analysis based on fixed and variable imposed costs

Abstract

Open access to transmission networks as well as designing an efficient cost allocation method are the key points that provide free competition for participants in power market. Restructuring in power systems has created new challenges which emphasize the development and fairness of economical criteria such as pricing of different services in market environment. Besides, the charge of network usage is a controversial subject, itself. To address this problem, many methods for transmission line cost allocation have been proposed. Amongst them, MW-Mile methods are based on the “extent of use” concept. Inability to take various fixed together with variable imposed costs into account can be announced as the major disadvantage of this approach. In response, this paper presents a new combinatorial pricing method which is preferable over the other methods in considering two basic features of a proper pricing approach, i.e., fairness and producing effective economical incentives. In order to verify the effectiveness of the proposed method, it is applied to the IEEE 24-bus test system.