AREA-SPECIFIC AND TIME-SPECIFIC MARGINAL CAPACITY COSTS OF ELECTRICITY DISTRIBUTION

Marginal costs of electricity vary by time and location. In the past, researchers attributed the variations to factors related to electricit y generation and transmission. These authors, however, have not analyz ed possible variations in marginal distribution capacity costs (MDCC). The objectives of this paper are: (i) to show that large MDCC variati ons are due to the dispersion in distribution capital expenditures by time and space, (ii) to propose a method for quantifying the area- and time-specific MDCC in the presence of lumpy investments, and (iii) to compare our MDCC estimates to those commonly used in the electric uti lity industry. Our proposed method and its results were adopted by the California Public Utilities Commission (CPUC) in 1992 for Pacific Gas and Electric Company (PG&E), the largest privately owned electric uti lity in the U.S.