Long-run marginal cost based pricing of interconnected system wheeling

Each utility in an interconnected system has an obligation to guarantee suf ficient transmission capability to maintain an efficient, economical, relia ble and secure system during peak scenarios. Security is an important consi deration underlying network investment. The standards of service have a dir ect impact on investment burdens and therefore definition and consensus amo ng participants in respect of security standards are necessary. Charging fo r transmission services, ensuring the investment levels and recovery of sun k capital are new problems now receiving attention in the context of electr icity supply industry unbundling. In this paper a method for long run margi nal cost (LRMC) based pricing in multi-area interconnected system, based on the incremental use of each area's transmission network at times of peak f low, is proposed. The LRMC of transmission capacity is based on long term c osts of transmission investment requirements. The marginal wheeling costs, with security taking into account, are computed using the sensitivities of the MW-mile of each area with respect to the bus power demand. These sensit ivities are calculated using a linear expansion of the Kuhn-Tucker conditio ns of the investment cost optimization problem. Contingency ranking method is used to speed up the computation. (C) 1999 Elsevier Science S.A. All rig hts reserved.