Analysis of POC charging method and Regional Postage Stamp method for cost allocation for transmission line usage. SAMEER MEHRA School of Electrical Engineering, VIT University Vellore, T.N. INDIA sameermehra2008@vit.ac.in RAVI PATNI School of Electrical Engineering, VIT University Vellore, T.N. INDIA ravipatni2008@vit.ac.in Abstract This paper summarises the difference between the regional postage stamp method and the new POC(point of connection) charging method used for cost allocation for the transmission system according to the usage. Issues related with the modelling of HVDC lines are also discussed. Comparison and analysis has been done on the Indian system and the result shows significant differences in the costs. Keywords Cost allocation; Marginal flow; POC; Transmission pricing. 1. INTRODUCTION The transmission system plays a vital role in delivering energy from the generation stations to the demand centres located remotely. As power plants are interconnected via the transmission network, together they lower the overall generation cost and increases the reliability of the system [1]. In a restructured Power system transmission pricing based on the usage is a challenging task. It should not only meet the traditional revenue requirements of transmission owners and reflect comparability; it should also be economically efficient and practical. 2. METHODS OF COST ALLOCATION 2.1 Regional Postage Stamp Method A postage stamp rate is a flat per kw charge for network access within a particular zone, based on average system costs. Postage stamp transmission tariffs allocate total system costs to consumers on the basis of load share/energy share: A customer pays a transmission charge equal to the total system cost-weighted according to their consumption divided by total consumption. This method results in higher costs above marginal costs because it incorporates historical fixed costs. The cost for transmitting power within the zone is independent of the transmission distance. A generator transmitting to a load in a different zone would have to pay the postage stamp charges for the zone of origin and the zone of delivery, and also any intervening zones. This accumulation of zone access charges is often called pan-caking. Although transmission within a zone is independent of distance, longer distances increase the likelihood that more than one zone will be crossed, which would increase the total transmission cost. Although postage stamps rates provide a way to recover the fixed costs [7] of the network, but they provide no information about congestion. The advantage of using this method is that it is easy to administer. It does not reflect marginal costs except in a special circumstance where all generators are at equal distances from load and where the load on each line is ISSN : 0975-5462 Vol. 3 No. 6 June 2011 4529
equal. Postage stamp method has been divided into five sub methods. In each method the total charge has been divided into two components - 1. Actual power Transmission charges 2. Charges for transmission losses The components of the ARR of Transco have been taken as follows:- 1. Aggregate Revenue Requirement. (ARR) 2. Return on capital base (RCB) 3. Administrative & General cost (AGC) 4. Repair & Maintenance cost (RMC) 5. Interest & Finance cost (IFC) 6. Depreciation cost (DC) 7. Provision for bad and doubtful debts (PBD) 8. Other expenses (OE) 9. Expenses capitalized (EC) The computation of the ARR has been done as follows (as calculated)- ARR = RCB + AGC + RMC + IFC + DC + PBD + OE EC A postage stamp tariff is most suitable when the area in consideration is relatively small. Flows are relatively simple and does not cause disproportionate load on one part of the system [6]. Priority is accorded to simplicity and social acceptability. 2.2 POC CHARGING METHOD It is the methodology of computation and sharing of ISTS Charges and Losses among Designated ISTS Customers (DICs) which depends on location and sensitive to distance and direction of the node in the grid. Charges would be computed for each node of DICs based on Hybrid Method. It is the hybrid method comprising of Marginal Participation and Average Participation method. Average Participation method is used for determination of participation factors of slack buses. 2.2.1 Average Participation Method The method assumes that the power reaching a certain node in the electric network is proportionately shared by all the paths going out from that node. It has been observed [4] that transiting networks end up with excess payments. Large price takers may have more favourable tracing solutions which reduce their POC. Fig.1 An example of Average participation Method or Proportionate tracing method. ISSN : 0975-5462 Vol. 3 No. 6 June 2011 4530
2.2.2 Marginal Participation Method Steps Involved- 1. Increment the injection by 1MW and return the load flow for each source node and calculate the marginal flows for transmission lines resulting from this injection. 2. Increment withdrawal by 1 MW and return the load flow for each sink node and calculate the marginal flows for transmission lines resulting from this withdrawal. Fig.2 Marginal Participation Method 3. Then recover the cost of the line from an entity in proportion to its marginal participation [2]. Sharing charges in proportion to marginal flows alone ignores the magnitude of injection or withdrawal. Fractional charge of the line cost to be borne by a load (L i ) for the line (l m ) is given by 0 & 0 If the marginal flow is negative then entity will be paid and vice versa. This incentive will have to be borne by other payers of the network. Generator tracing will lead to load dispersion factors and vice versa. Here each entity disperses its incremental MW in proportion to these dispersion factors. 2.2.3. POC Computation The flow on HVDC line is set by the power order. Hence, the marginal participation of the HVDC line is zero. Here usage cost of each utility is first computed by considering a base cage with all HVDC lines in service and then the flow is simulated with a single HVDC outage. The cost of HVDC line is shared in proportion to the increase in usage cost. First Part of Bill (monthly): Charges for use of Transmission assets based on POC Methodology (50% PoC+50%UC). UC = Total ARR / (Sum of Approved Injection +Sum of Approved Withdrawal) The indirect method of recovering the HVDC cost is given below: a. Calculate charges for each node with all HVDC line present. b. Calculate charges for each node with HVDC out of service. ISSN : 0975-5462 Vol. 3 No. 6 June 2011 4531
c. Identify which nodes are getting benefited with its presence and the cost of HVDC would be allocated to those nodes which are getting benefited in the ratio of benefit. Deviation = Metered MW-(Injection/Withdrawal + Additional Medium term Injection/Withdrawal + Additional Short term Injection/Withdrawal) Case I: 0 %< Deviation < = 20% Charges for deviation = POC Charges of that zone Case II: Deviation >20% Charges for deviation: 1) For quantum of deviation upto 20%: POC Charge of that zone 2) For quantum of deviation above 20%: 1.25 times POC Charge. Pan caking means transmission tariffs dependent of power path, where the cost of each new grid level is added together, dependent not only on the location of the seller and buyer, but on the specific path through which the parties have achieved transmission access. Earlier in a transaction involving more than two region, losses of all the regions involved were applied on the transaction. In the new methodology, loss percentage generation zone (injection side) and loss percentage of demand zone (withdrawal side) would be applicable only. Thereby pan caking would be removed [3]. 3. COMPARISON AND ANALYSIS CERC Recommendation Method is the hybrid method only which comprises of AP-MP method calculations. This method has the least transmission charges and the monthly charge [5]. Fig.3 Comparison between the methods of cost allocation. Charges - 50% of the ATC of the ISTS Licensees will be recovered based on the POC charges and the balance 50% will be recovered based on the Uniform Charges (separate postage stamp rates).for medium term / short term transactions the POC charges will be applicable in full. Losses-Total losses will be computed as per the existing methodology. ISSN : 0975-5462 Vol. 3 No. 6 June 2011 4532
1. 50% of the losses will be allocated to beneficiary states based on the POC loss allocators computed using the Hybrid Method and the balance 50% losses will be allocated uniformly according to the existing methodology. 2. For the medium term / short term transactions the POC loss allocators will be applied. 4. CONCLUSION In this paper methods based on Postage Stamp and POC for transmission pricing have been discussed. The merits and demerits of the two methods are discussed after calculating the transmission prices. The Postage Stamp method is easily understandable and the transmission charges can be computed easily on the flat basis. The POC methodology framework will greatly facilitate fair and transparent competition. The impact of pan caking is further amplified in such bid processes because of application of escalation factors to transmission charges over a 25 year period. The proposed methodology will remove such difficulty. REFERENCES [1] An introduction to the pricing of electric power transmission, Utilities Policies, Volume 6, Issue 3, September 1997 by Michael Hsu. [2] Sharing of Interstate transmission charges and losses CERC regulations. [3] The Importance of Marginal Loss Pricing in an RTO Environment, Leslie Liu, Tabors Caramanis,Cambridge Energy Solutions. [4] Assef Zobian, Richard D. Christie, Bruce F. Wollenberg and Ivar Wangensteen, Transmission Management in the Deregulated Environment, Proceedings of the IEEE, Volume 88, No. 2, pp. 170, 2000 [5] Brief Profile of Power grid and its area of expertise, www.powergridindia.com. [6] D. Shirmohammadi, X.V. Filho, B. Gorestin, and M.V.P. Pereira, Some Fundamental Technical concepts About Cost Based Transmission Pricing, IEEE Trans. on Power Systems, vol. 11, no. 2, pp. 1002-1008, May 1996. [7] T. W. Gedra, On transmission congestion and pricing, IEEE. Trans. Power Syst., vol. 14, pp. 241 248, Feb. 1999. BIOGRAPHIES Sameer Mehra is currently an undergraduate student pursuing his B.Tech in Electrical and Electronics Engineering from VIT University, Vellore, Tamil Nadu, India. Presently his areas of interests are deregulation of power systems and energy management systems. Ravi Patni is currently an undergraduate student pursuing his B.Tech in Electrical and Electronics Engineering from VIT University, Vellore, Tamil Nadu, India. His areas of interest are renewable energy, distributed generation and transmission pricing. ISSN : 0975-5462 Vol. 3 No. 6 June 2011 4533