Fixed Transmission Charges Based on the Degree of Network Utilization

Abstract

The core objective of transmission tariffs is the recovery of costs related to the transport of electricity. A usual component of a tariff is a fixed charge that covers the costs of the network infrastructure. As many customers use the power grid, the rate of this charge should reflect, as closely as possible, the actual costs of supplying energy to the individual consumers. These costs result from which network elements have been used in delivering the electricity, and to what extent these elements have been used. Therefore, the fixed transmission rates should depend on the degree of network utilization. This article investigates definitions of the degree of network utilization based on the active power flow. To calculate the degree of network utilization, the flow of electricity on a branch must be decomposed into the streams flowing to individual customers. For this decomposition, two methods are examined: a power flow tracing method, based on the proportional sharing principle, and an incremental power flow method, based on the superposition principle. The analyzed methodology is applied to a small test system for conceptual discussions, as well as to the transmission network of the Polish power system, as an example of practical application. The results of this study were then compared with the commonly used “postage stamp” method. Finally, several practical aspects related to the potential implementation of the presented methodology are discussed.

Keywords

• electricity market
• transmission pricing
• fixed cost allocation
• “postage stamp” method
• power flow decomposition
• proportional sharing principle