EFFECTS OF NEGLECTING VOLT VAR OPTIMIZATION ON MARGINAL COST-BASED PRICING FOR WHEELING TRANSACTIONS AND INDEPENDENT POWER PRODUCERS/

Practical implementation of open transmission access will require a pr icing policy for wheeling transactions and independent power producers that will ensure economic and secure power system operation. Various pricing schemes have been proposed, but typically without accounting f or the cost of producing reactive power in a direct manner. In this pa per, a marginal cost-based pricing philosophy that offers insight into an appropriate new price component associated with reactive power is presented. Under the proposed philosophy, compensation is provided to those producers of reactive power who participate in achieving the req uired system VARs. The proposed method and the effects of neglecting t he voltage/VAR optimization problem is demonstrated on the IEEE 6- and 30-bus test systems for wheeling transaction and independent power pr oducer pricing. (C) 1997 Elsevier Science S.A.