Evaluation of transmission pricing methodologies for pool based electricity markets

This paper presents and analyses several approaches for transmission cost allocation in a centralized pool based electricity market environment that includes composite embedded/marginal transmission pricing mechanisms. The revenue from marginal cost based remuneration (MBR) necessitates supplementary charges; thus it is required to identify the contribution of individual generators and loads to the line flows using tracing methods and implement usage-based transmission pricing methods for allocating the remaining fixed cost. Eight transmission pricing schemes and three tracing methods are being evaluated and applied on Garver's 6-bus system and on IEEE 24-bus reliability test system to illustrate the different results derived among the pricing schemes for each tracing method or among tracing methods for each pricing scheme.