Transmission Use of System Charges Based on Trade-Offs Between Short-Run Operation Cost and Long-Run Investment Cost

Previous studies on long-run network charges assume that network reinforcement would be required when the loading level of a circuit reaches its designed capacity. Such assumption works well for a passive distribution network but is not valid for transmission networks as they have active congestion management capabilities. Transmission network operators normally can only justify for network investment when congestion costs exceed network expansion costs. This trade-off between operational cost and investment cost is not considered in any of the existing long-run marginal or incremental cost pricing (LRIC or LRMC).