Transmission pricing using accounting rate of return and MW-km methods

Abstract

This paper presents a realistic and transparent approach to determine transmission cost for the transmission lines of a power system network by allocating the costs to all the participating generating units and load demands. There is a requirement for developing an appropriate transmission pricing mechanism which can give economic and technical information to the participants of the market, i.e., customers, generation and transmission companies. This paper proposes a methodology to allocate the cost of transmission in power system network. In this paper, accounting rate of return (ARR) and MW-km approaches have been used to evaluate the cost of transmission in the system. Simulation results are presented on standard IEEE 14 bus system.