Security-Based Tariff for Wheeling Contracts Considering Fair Congestion Cost Allocation

Abstract

Transmission pricing is an important issue for transmission cost allocation. Because of the importance of this issue in the restructured power systems, several methods have been presented in recent years. Also, fairness of methods is a vital issue from the viewpoint of market designers and policy makers. This paper proposes a novel fair method to specify transmission tariffs, especially for wheeling contracts during peak and off-peak periods. In comparison to other recent studies, this approach has the advantage of considering congestion and security cost, when the wheeling contract leads to deviation from the optimum operation of wheeler network. Moreover, the security cost which is usually ignored in the transmission pricing will be allocated to market participants fairly. This method is applicable to implement in combined pool and bilateral electricity markets. In order to make a fair competition among market users, the congestion cost is allocated to all users in proportion to their contribution in network congestion. Compared with the current methods, the proposed approach take into consideration the congestion and security cost to strike the right balance between profit and cost related with fair market-based mechanisms. At the end, numerical examples on nine-bus test power system are utilized to demonstrate the effectiveness of the proposed approach.