A new methodology for cost allocation of transmission systems in interconnected energy markets

This paper presents a new methodology for allocating transmission system costs in single or interconnected energy markets. Initially, the proposed method allows the decomposition of the total transmission cost into two components: the first corresponds to the utilized network capacity, estimated at a specified operating condition, and the second refers to the transmission capacity available but not used in the system. A technique for decomposing nodal tariffs per subsystem guarantees the applicability of the method to interconnected markets. From the proposed procedure, it is possible to determine the responsibility of each participant (or group of participants) in the use of any specified set of transmission elements. The flexibility of this method allows the establishment of criteria based on economic and technical aspects for cost allocation of internal circuits of each subsystem, as well as of the tie elements between the subsystems. Important characteristics of the proposed methodology, such as transparency, impartiality, and flexibility, are analyzed and illustrated based on numerical applications with the IEEE Reliability Test System. Experience with the Brazilian transmission network is also discussed.