Pricing transmission services in the context of industry deregulation

Abstract

The changing structure of the electricity supply industry and the emergence of independent power producers and independent customers is bringing transmission pricing into a new focus. The costs of operating, maintaining and expanding the transmission system, that is pricing transmission services, needs to be addressed. This has to be done on an economically rational and technically meaningful basis and this paper suggests an approach which distinguishes between operating and embedded costs and develops separate methods in respect of each of these components. Capacity use as well as reliability benefits derived by different users are taken into account in the disbursement of charges for investment recovery. New insights into the marginal pricing approach to the recovery of operating costs are also briefly mentioned.