A novel approach to allocate transmission embedded cost based on MW-Mile method under deregulated environment

In a competitive electricity market, the transmission costs should be fairly distributed amongst the users of the transmission facilities, in order to attain optimal usage of the transmission facilities and to provide correct economic signal for future generation planning and load placement. In this paper, transmission costs are divided into three components; i.e. actual transmission usage cost, unused capacity cost, and network reliability cost; and is distributed amongst the users in a non-discriminatory manner. The proposed algorithm has been implemented on a 9-bus test system and the results are compared with corresponding MW-Mile based method results.