Transmission network cost allocation based on a possible maximum used capacity for N-1 secure operation

This paper presents a power flow based approach to transmission fixed cost allocation problem in a pool based electricity market that takes into consideration N-1 secure annual operation. In this pricing approach, the cost of each facility is linked to the highest possible power flow a facility may face under a contingency situation in a year. Charges for each facility are based on the facility usage at that system snapshot that requests this highest possible maximum used capacity. Network usage is approximately determined by generalized distribution factors and three variations of the MW-Mile method for pricing counter-flows are investigated for the proposed cost allocation method. The proposed cost allocation method is applied to the IEEE 24-bus reliability test system and compared with other transmission pricing methods.