A Study on the Pricing of Network Services

This paper compares two marginal cost based transmission pricing methods, which can be directly incorporated into the energy dispatch models. In both the proposed methods direct transmission costs (embedded cost) as well as re-dispatch cost (out-of-merit generation cost) caused by network losses and network congestion, are accounted under a unified model. Method-1 employs Power Transfer Distribution Factors (PTDF) to model network related details. Method-2 utilizes modified DC power flow techniques to represent the network. The merits and de-merits of the two approaches are discussed using the results obtained for a simple 3-node network and the modified IEEE 24-bus reliability test system (RTS).