Electrical and Electronic Engineering. 2011; 1(1): 33-41 DOI: 10.5923/j.eee.20110101.06 A Comparison of Fixed Cost Based Transmission Pricing Methods M. Murali * , M. S. Kumari, M. Sydulu Electrical Engineering Department, National Institute of Technology, Warangal, 506004, India Abstract In the restructured power market, it is necessary to develop an appropriate pricing scheme that can provide the useful economic information to market participants, such as generation, transmission companies and customers. Proper pricing method is needed for transmission network to ensure reliability and secure operation of power system. Accurately estimating and allocating the transmission cost in the transmission pricing scheme still remains challenging task. This paper gives an overview of different costs incurred in transmission transaction, types of transmission transactions and the trans- mission pricing methodologies. Embedded as well as Incremental cost methods are explained. It mainly focussed on deter- mining the embedded transmission cost by various methods and compared the results for 6bus, IEEE 14bus and RTS 24 bus systems. Keywords Bialek Tracing, Embedded Cost, GGDF, MVA-Mile, MW-Mile, Postage Stamp, Tracing 1. Introduction The rapidly changing business environment for electric power utilities all around the world has resulted in unbun- dling of services provided by these utilities. With the intro- duction of restructuring into the electric power industry, the price of electricity has become the focus of all activities in the power market. The objective of transmission pricing is to recover all or part of the existing and new cost of transmis- sion system. Pricing of transmission services plays a crucial role in determining whether providing transmission crucial role in determining whether providing transmission services is economically beneficial to both the wheeling utility and the wheeling customers. Engineering analysis which deals mainly with determining the feasibility and the cost of pro- viding transmission services is only one of many considera- tions in the overall process of pricing transmission services. So, it is important to distinguish between transmission costs and prices. 1.1. Categories of Transmission Transactions The following are the categories[2,3] of transmission transactions: 1.1.1. Firm Transmission Transactions These transactions are not subject to discretionary in- terruptions and are specified in terms of MW of transmission * Corresponding author: matcha.murali@gmail.com (M.Murali) Published online at http://journal.sapub.org/eee Copyright © 2011 Scientific & Academic Publishing. All Rights Reserved capacity that must be reserved for the transaction. The transco makes arrangements for enough capacity on the network to meet these transaction needs. These could either be on a long-term basis, in the order of years or on short-term contracts (up to one year). 1.1.2. Non-firm Transmission Transactions These transactions may be curtailable or as-available. Curtailable transactions are ongoing transactions that may be curtailed at the utility's discretion. As-available transactions are short-term, mainly economy, transactions that take place when transmission capacity becomes available at specific areas of the system at specific times. 1.1.3. Long-term Transmission Transactions A long-term transaction takes place over a period span- ning several years. Long-term transmission transaction is long enough to allow building new transmission facilities. Transmission service provided as part of long –term firm power sales is an example of long-term transaction[3]. 1.1.4. Short-term Transmission Transactions A short-term transmission transaction may be as short as a few hours to as long as a year or two and as such are not generally associated with transmission reinforcements. Short term transaction may be a bilateral contract or pool trad- ing[3]. 1.2. Components of the Transmission Cost The major components of the transmission cost of trans- mission transactions are:[17]