CALCULATING SHORT-RUN MARGINAL COSTS OF ACTIVE AND REACTIVE POWER PRODUCTION

Proper pricing of active and reactive power is an important issue for economic and secure operations of power systems in an open transmissio n access (OTA) environment. This paper presents a flexible formulation for this purpose. The proposed formulation identifies an important pr ice component for reactive power, which is fundamentally different fro m those existing in the literature. This makes the pricing of reactive power more understandable. The proposed approach is efficient for rea l-time application and allows for carrying out active and reactive pow er pricing simultaneously or independently through the use of the deco upled optimal power flow formulation. Price signals derived from this approach are quite meaningful from an engineering point of view. In ad dition, the proposed approach can be easily extended to evaluate NUGs and wheeling transactions. The paper includes test results on the 30- and 118-bus IEEE standard systems.