1218 IEEE TRANSACTIONS ON POWER SYSTEMS, VOL. 15, NO. 4, NOVEMBER 2000 Review of Usage-Based Transmission Cost Allocation Methods under Open Access Jiuping Pan, Yonael Teklu, Saifur Rahman, Fellow, IEEE, and Koda Jun Abstract—This paper presents an overview of usage-based methods of transmission cost allocation under open access. Allocation of transmission costs involves both technical and regulatory issues, and as a result, the methods available in the literature differ in their definition and measure of the “extent of use” of transmission resources. The primary objective of this paper is to provide a summary of recent techniques used for designing fair and equitable access fees for the recovery of fixed transmission costs. The discussion is thus organized under two major subtopics: algorithms for transmission usage evaluation and alternative pricing strategies. Numerical examples are provided to show the results using different methods. Index Terms—Cost allocation methods, open access, pricing strategies, usage of transmission resources. I. INTRODUCTION C OST allocation is a major issue in transmission open access faced by the electric power industry. According to the U.S. Federal Energy Regulatory Commission (FERC), transmission will continue being regarded as a natural monopoly, whereby transmission providers will be required to offer the basic transmission service in conjunction with a number of mandatory and/or voluntary ancillary services [1], [19]. Basic transmission service refers to the “path provision” function of the transmission grid while ancillary services, such as operating reserves, regulation, load following and voltage control, are the functions necessary for maintaining the reliability of the bulk-system as well as undertaking commercial transactions across the grid [7]. The cost of the basic transmission services corresponds primarily to the fixed transmission cost that is also referred to as the transmission capacity cost, or the existing system cost, or the embedded transmission facility cost. Electric utilities traditionally allocate the fixed transmission cost among the users of firm transmission service based on Postage-Stamp Rate and Contract Path methods [20]. In the postage-stamp rate method, transmission users are not differentiated by the “extent of use” of transmission facilities but charged based on an average embedded cost and the magnitude of transacted power. Contract path method, on the other hand, assumes that the transacted power would be confined to flow along an artificially specified path through the involved transmission systems. Accordingly, the transaction will be charged a postage-stamp rate that may be calculated either separately for each of the transmission systems or as a grid average. In reality, however, the actual path taken by a transaction may be quite different from the specified contract path thus involving the use of transmission facilities outside the contracted systems. MW-Mile methodology may be regarded as the first pricing strategy proposed for the recovery of fixed transmission costs based on the actual use of transmission network [5], [6]. In this method charges for each wheeling transaction are based on the measure of transmission capacity use. This is determined as a function of the magnitude, the path and the distance traveled by the transacted power. Since the charge for basic transmission service is usually the largest component of the overall charge of transmission services, a considerable amount of research effort has focused on the development of usage-based cost allocation schemes, and various implementations of MW-Mile methodology have been proposed in the literature [10], [18], [22]. Allocation of ancillary services is a rather complicated problem. Unlike the basic transmission service, the cost of ancillary service often involves several cost components. For instance, the cost of operating reserve may involve capacity cost, energy cost and opportunity cost. Moreover, the costs of some ancillary services may vary greatly as a function of time, location, and level of system load. Although some newly proposed cost allocation methods can determine the contributions to real power losses and reactive power support from individual users, very few publications are available for the allocation of regulation, load following and operating reserves. These ancillary services are usually distributed among the transmission users in proportion to their scheduled/metered generation or demand. Efforts are currently underway in the industry to encourage the development of metrics and the creation of competitive markets for ancillary services [7], [12]. The primary objective of this paper is to provide a summary of recent techniques used for designing fair and equitable access fees for the recovery of fixed transmission costs. Real-time congestion pricing strategies associated with transmission constraints in a competitive electricity market are not included. The paper is organized under two major subtopics: algorithms for transmission usage evaluation and alternative pricing strategies. Numerical examples are provided to compare the results using different methods. II. MW-MILE METHODOLOGY Manuscript received March 22, 1999; revised September 3, 1999. J. Pan, Y. Teklu, and S. Rahman are with the Alexandria Research Institute, Virginia Polytechnic Institute and State University, Alexandria, VA 22314 USA. K. Jun is with the Mathematical Engineering Group of R&D Center, Tokyo Electric Power Company, Yokohama, 230-8510, Japan. Publisher Item Identifier S 0885-8950(00)10351-7. In the original MW-Mile methodology, DC power flow formulation was used to estimate the usage of firm transmission services by wheeling transactions, and the procedure for multitransaction assessment may be outlined as follows [5]. 0885–8950/00$10.00 © 2000 IEEE PAN et al.: REVIEW OF USAGE-BASED TRANSMISSION COST ALLOCATION METHODS UNDER OPEN ACCESS Step 1) For a transaction , the transaction-related flows , are first on all network lines, calculated using DC power flow model considering the nodal power injections only involved in that transaction. Step 2) The magnitude of MW flow on every line is mul(in miles) and the cost per tiplied by its length MW per unit length of the line (in $/MW-Mile), and summed over all the network lines as (1) The above process is repeated for each transaction , including one comprised of the utility’s native generations and loads. Finally, the responsibility of transaction to the total transmission capacity cost is determined by (2) MW-Mile methodology ensures the full recovery of fixed transmission costs and reflects, to some extent, the actual usage of transmission systems. 1219 within a distribution company. The concepts of distribution factors can also be used for transmission congestion cost allocation in competitive electricity markets as shown in [13]. B. AC Flow Sensitivity Indices Similar to the application of DC flow distribution factors, the sensitivity of transmission line flows to the bus power injections can also be derived from AC power flow models. One such example can be found in [24] where the contributions of each generation bus to all transmission line MW flows were directly estimated via a set of coefficients named Line Utilization Factors (LUFs) as shown below. (3) The numerical values of LUFs can be calculated using standard AC power flow Jacobian with some minor simplifications. The concept of Reactive Power Adjustment Factor (RPAF) was introduced in [23] as a measure of the impact of unit MVA load change or a transaction on the total generation reactive power output. The formulation of RPAF is shown below involving only the sensitivity indices of network reactive power losses to the active and reactive injections together with appropriate scaling factors. III. TRANSMISSION USAGE EVALUATION Accurate knowledge of transmission usage is essentially important in the implementation of usage-based cost allocation methods. On one hand, due to the nonlinear nature of power flow equations, it is theoretically very difficult to decompose the network flows into components associated with individual customers. On the other hand, from an engineering point of view, it is possible and acceptable to apply approximate models or sensitivity indices to estimate the contributions to the network flows from individual users. (4) is the transmission network reactive losses, where and are the unit active and reactive load at bus . Scaling factors and are used to reconcile the difference between the total system reactive power losses and the total incremental reactive power losses while scaling factors and are used to and are consistent with ensure that the load increments specified power factor at the given bus. A. Distribution Factors Distribution factors based on DC power flows can be used as an efficient tool for evaluating transmission capacity use under various open access structures [11]. These distribution factors, i.e., Generation Shift Distribution Factors (GSDFs) and Generalized Generation/Load Distribution Factors (GGDFs/GLDFs) have been used extensively in the domain of power system security analysis to approximate the relationships between transmission line flows and the generation/load values. The application of distribution factors for assigning transmission payments may offer transmission providers three alternatives to allocate the total fixed transmission costs among different users, i.e., based on transaction-related net power injections, only to generators, and only to loads. In [5], GSDFs were used in conjunction with linear programming to identify the maximum transaction-related flows for cases in which transactions were specified by bounded generation and load injections. In [11], GGDFs were applied directly to estimate the contribution by each generator to the line flow on the transmission grid while GLDFs were used to allocate the sub-transmission network charges over the loads C. Full AC Power Flow Solutions More precise cost information is often needed in the assessment of wheeling transactions requiring full AC power flow solutions or OPF studies. In a single-transaction case, the “differencing approach” can be used which only involves two AC power flow or OPF studies, one without the transaction (base case) and one with the transaction (operating case) [6]. However, the problem becomes a greater challenge in a multi-transaction case because of the nonlinear nature of power flow models and also the interactions among different transactions. Recently, a power flow based multi-transaction assessment methodology was introduced in [21], which involves the following three main study steps. Step 1) Perform two power flow simulations, one for the base case (no transactions) and one for the operating case (including all the transactions) to determine the combined impacts caused by the transactions on the system. These impacts may include MW/MVAR line flows, reactive power output of generators and real power losses replacement from the slack bus. 1220 IEEE TRANSACTIONS ON POWER SYSTEMS, VOL. 15, NO. 4, NOVEMBER 2000 Step 2) For each transaction , investigate two power flow cases: in one case only transaction is included and in the other case all transactions except for are included. Comparing the results of these two simulations with the base case gives marginal and incremental impacts of each individual transaction on the system. Step 3) The problems of “fair resource allocation” are then solved to distribute the MW/MVAR line flows, reactive power output of generators, and real power losses to each transaction. The formulation below shows an example on how the reactive power sup, can be distributed to port from generator , i.e., each transaction by minimizing the sum of squared difference between the actual allocation and the marginal and incremental values. (5) , , are the actual allowhere cated, marginal and incremental reactive power support for transaction respectively. This method is suitable for an open market model consisting of one or more pools, and the study objective is to determine the impact of a transaction on the base operating condition. D. Power Flow Decomposition Power Flow Decomposition (PFD) algorithm is a network solution for allocating transmission services among individual economical transactions on the system [1]. It can determine, for each transaction, the following: i) the usage of transmission network (both real and reactive flow components), ii) the net power imbalance and iii) the contributions from participating generators to real-power-loss compensation. The algorithm is initially designed for the application in a bilateral contract based market model but can also be used for wheeling transaction assessment [1], [20]. The PFD algorithm is based on superposition of all transactions on the system and decomposes the network flows into components associated with individual transactions plus one interaction component to account for the nonlinear nature of power flow models. Assuming there are totally transactions on the system, the AC power flow solutions can then be decomposed into: (6) (7) where is the vector of total complex power injected into the system, is the vector of complex power injected into the system in response to the transaction , and is the vector of complex power caused by the interaction among transactions. Similar definitions hold for the complex valued flow matrices , and . It has been shown that the calculation of the major contribution of each transaction to the network flows is independent of the interaction effects among different transactions. Theoretically, only a small percentage, in the order of 5% of a given transaction, is in the interaction component under normal operating conditions. Thus, interaction components can be assigned to individual transactions in proportion to the scales of transacted power. This study suggests a revised PFD formulation with distributed slack bus that involves an iteration process to allocate the net current imbalance caused by each transaction among distributed slack buses and then applies the formulation with single slack bus to determine the network flows. Test results have shown that the revised PFD procedure can satisfy both the equality criterion and the economic dispatch rule while preserving the same basic assumptions. E. Tracing Algorithms Two tracing algorithms, i.e., the Bialek and the Kirschen, are available. Both are designed for the recovery of fixed transmission cost in a pool based market. The basic assumption used by tracing algorithms is the proportional sharing principle. In Bialek tracing algorithm, it is assumed that the nodal inflows are shared proportionally among the nodal outflows. Kirschen tracing algorithm assumes that, for a given common (a set of contiguous buses supplied by the same set of generators), the proportion of the inflow traced to a particular generator is equal to the proportion of the outflow traced to the same generator. 1) Bialek Tracing Algorithm: Bialek tracing algorithm has two versions: upstream-looking algorithm and downstream-looking algorithm [14]–[16]. The upstream-looking algorithm will allocate the transmission usage/supplement charge to individual generators and apportion the losses to the loads, and conversely, the downstream-looking algorithm will allocate the transmission usage/supplement charge to individual loads and apportion the losses to the generators. The algorithm is constructed on a matrix formulation and therefore enables the use of linear algebra tools to investigate numerical properties of the algorithm. Extensive studies have shown its capability and efficiency in allocating transmission usage/supplement charge among different generators or loads under normal operating conditions. The algorithm can also provide solutions to the questions as how much of the power output from a particular generator/station goes to a particular load or how much of the demand of a particular load comes from a particular generator/station. In addition, the topological distribution factors are always positive, thus eliminating many problems resulting from counter flows. Minor errors may be incurred when the lines are heavily loaded due to the assumptions used in the problem formulation. 2) Kirschen Tracing Algorithm: The Kirschen algorithm also has two versions designed for identifying the contributions from either the individual generators or loads to the line flows [4], [9]. In general, this algorithm shares many useful functions and attractive features with the Bialek tracing algorithm. PAN et al.: REVIEW OF USAGE-BASED TRANSMISSION COST ALLOCATION METHODS UNDER OPEN ACCESS This algorithm is based on a set of definitions: domains (set of buses getting power from a particular generator), commons (set of contiguous buses getting power from the same set of generators) and links (branches connecting commons). The state of system can then be represented by a directed graph consisting of commons and links, with the direction of flow between commons and the data about generations/loads in commons and flows on the links. A recursive procedure is used to calculate the contributions from the generators (or loads) to the commons, to the links, and to the loads (or generators) and the line flows within each common. Kirschen tracing algorithm is able to work well under various system-loading conditions because no additional assumptions are used in the problem formulation. On the other hand, it is a simplified approach since the contributions from the generators (or loads) to a particular common will be proportionally assigned to the loads (or generators) and line flows within that common. IV. ALTERNATIVE PRICING STRATEGIES This section considers alternative transmission pricing strategies under open access. In particular, we will discuss three key issues in implementing usage-based cost allocation. These include unused transmission capacity, MVA-Mile methodology, and pricing of counter flows. A. Unused Transmission Capacity Unused or unscheduled transmission capacity is defined as the difference of facility capacity and the actual flow on that facility. In the original MW-Mile methodology [5], the usage of transmission facilities is measured by absolute flow values, and the transmission facility costs are allocated in proportion to the ratio of flow magnitude contributed by a particular transaction and the sum of absolute flows caused by all transmission users. The following equation may give a more general expression of MW-Mile rule. (8) where is the cost allocated to transaction , is the embedded cost of facility ; is the magnitude of flow on facility caused by transaction ; and represent the sets of transmission facilities and transactions on the system. The above pricing rule ensures the full recovery of all the embedded costs and assumes, inherently, that all transmission users have to pay both for the actual capacity use and for the unused transmission capacity. There are a number of reasons calling for alternative pricing rules on the allocation of unused transmission capacity [1]. First, this pricing rule does not encourage more efficient use of transmission systems because no matter how the line capacity utilized the total costs will be recovered. Second, the cost allocation procedure can seem to be unfair to some users when they have to share the cost of an expensive transmission 1221 facility for which only a small portion of the facility capacity has been utilized. On the other hand, adequate transmission margin is required to maintain system reliability [2], [8]. One possible solution is to revise the MW-Mile formulation by charging the transmission users based on the percentage utilization of the facility capacity, , instead of the sum of flows contributed by all users [18]. That is, transmission users will be charged only for the actual capacity use but not for the unscheduled capacity. (9) This revised formulation cannot get full recovery of the fixed transmission costs since the total flows are usually smaller than the facility capacities under normal system conditions. The total ignorance of the reliability value of transmission margin under system contingency conditions is its main drawback. A combined pricing rule was proposed in [18] and also suggested in the discussion of [9], which divides the cost allocation , proportional into two components. The first component, to the utilized facility capacity, would be allocated to transmission users based on the actual usage. The second component, , which is a portion of the difference between the total embedded costs and the costs recovered by utilized transmission capacity, would be distributed among all users for system security reserve, in proportion to the transacted power. This combined pricing rule can be expressed by (9), (10) and (11). The parameter can be used to determine the level of cost recovery for the unused transmission capacity. (10) (11) More advanced solution requires the evaluation of reliability value of transmission margin to different customers. Reference [2] presented a conceptual procedure for embedded cost recovery based on the measures of capacity-use and reliability benefit. The reliability benefit is calculated for each line with respect to a particular transaction considering the probability of disconnection between the sending buses and the receiving buses involved in that transaction. Reference [8] proposed a well-designed reliability based approach where the revenue of each circuit is obtained by two parts: one part that considers the system use under normal state and the second part that consider the system under contingency conditions. Comprehensive reliability studies are involved in this method to determine the expected value of power flow variations and then an importance index is calculated for each line with respect to a particular transaction. These indices show how each transaction use the capacity margin of each line under contingency conditions. B. MVA-Mile Methodology It has been recognized that the use of transmission resources is best measured by monitoring both real power and reactive power given the line MVA loading limits and the allocation of 1222 IEEE TRANSACTIONS ON POWER SYSTEMS, VOL. 15, NO. 4, NOVEMBER 2000 TABLE I TRANSMISSION DATA AND BASE CASE FLOWS Fig. 1. Five-bus test system. reactive power support from generators and transmission facilities. Consequently, the basic concepts of MW-Mile methodology can be extended to include the charging for reactive power flows resulting in the so-called MVA-Mile methodology [17]. Besides full AC power flow studies, the network usage due to reactive power flows can be determined using sensitivity approaches, decomposition formulations and tracing methods. For instance, the decomposition formulation proposed in [1] can decompose the network flows into components, both real and reactive, associated with individual transactions. Electricity tracing algorithms can also be used to the reactive power flows. With the Bialek tracing algorithm, a fictitious node is added in the middle of each line to model the different natures of line reactive power losses [14], [17]. The newly developed Kirschen tracing algorithm uses real and imaginary currents to trace complex power flows between generators and loads [4]. TABLE II TRANSACTION-RELATED FLOWS AND CHARGES (T1) TABLE III TRANSACTION-RELATED FLOWS AND CHARGES (T2) C. Pricing of Counter Flows Counter flow is the flow component contributed by a particular transaction that goes in the opposite direction of the net flow. In the original MW-Mile formulation as well as some usage-based allocation pricing rules, the impact of each transaction on the flows is measured by the magnitude so that all transmission users are required to pay for the use of path-provision service, irrespective of the flow directions. However, in view of the contributions of counter flows in relieving the congested transmission lines, any usage-based tariff that charges for counter flows needs to be carefully reviewed. For this regard, the zero counter-flow pricing method suggests that only those that use the transmission facility in the same direction of the net flow should be charged in proportion to their contributions to the total positive flow [18]. On the other hand, proposals of giving a negative charge or credit to the users producing counter flows may not be easily accepted by the transmission service providers. V. NUMERICAL EXAMPLES This section presents an illustrative example based on a five-bus test system to show the results using different cost allocation methods. The five-bus test system is depicted in Fig. 1 and Table I gives the transmission data including the base case flows and the transmission revenue requirements as used in [1]. In the base case, the loads at buses 3, 4 and 5 are (45 MW, 15 Mvar), (40 MW, 5 Mvar) and (60 MW, 10 Mvar), respectively. The generation from bus 2 is fixed as 20 MW and bus 1 is the system slack bus. A. Evaluation of Wheeling Transactions As with [1], the following two wheeling transactions are assumed: T1: Injection of 5 MW at bus 1 and removal at bus 5 T2: Injection of 5 MW at bus 4 and removal at bus 2 Tables II and III below show the transaction-related flows determined by generation shift distribution factors (GSDFs), line utilization factors (LUFs) and power flow decomposition (PFD) algorithm as suggested in [20]. The original MW-Mile cost allocation rule, i.e., (7), is used to distribute the revenue requirements to each transaction including one representing the base case generations and loads. The wheeling charges calculated by the PFD algorithm are further distinguished between the use of MW-Mile and MVA-Mile rules. From Tables II and III, it can be noticed that the transaction-related MW flows and the wheeling charges determined by different methods are very close when the transmission capacity use is measured by MW flows. In particular, results from GSDFs and PFD algorithms are almost identical since both algorithms assume the bus voltage is close to 1.0 p.u. This finding PAN et al.: REVIEW OF USAGE-BASED TRANSMISSION COST ALLOCATION METHODS UNDER OPEN ACCESS TABLE IV TRANSMISSION USAGE AND CHARGES (G1) 1223 tribution of each generator to a broader area, named as common, which may include a large number of internal lines and load buses. VI. CONCLUSION TABLE V TRANSMISSION USAGE AND CHARGES (G2) is in general true for the evaluation of wheeling transactions because usually the amount of transacted power is relatively small in comparison to the native flows on the system. On the other hand, the costs allocated to both transactions would be reduced when the transmission capacity use is measured by MVA flows. In this simple example, the assumed wheeling transactions only involve real power and thus their contributions to the network reactive flows are insignificant with reference to the base case flows. B. Transmission Usage by Generators Tables IV and V below show the generator-related flows for the base case determined by generalized generation distribution factors (GGDFs), line utilization factors (LUFs), Bialek and Kirschen tracing algorithms. The original MW-Mile cost allocation rule, i.e., equation (7), is used to distribute the revenue requirements to each generator. Scaling factors are used in the cases with sensitivity based methods (i.e., GGDFs and LUFs) to ensure the total allocated cost is consistent with the required transmission revenues. From Tables IV and V, it can be noticed that the generatorrelated MW flows and transmission charges determined using GGDFs and LUFs are very close, meaning there would be no significant difference in using DC or AC sensitivity indices as far as the MW flow is concerned. In general, the Bialek tracing algorithm would give similar results as those from sensitivity based methods and therefore they may be used equivalently for the same purposes. Both tracing algorithms result in zero charging for G2 and full responsibility of G1 to the use of lines 1–2 and 1–3. However, very different results can be observed from the remaining lines with different tracing algorithms. As we discussed earlier, the Bialek method traces the contribution from each generator to every single line while the Kirschen method identifies the con- This paper attempts to present an updated review of recent progress on the subject of usage-based transmission cost allocation. Some basic conclusions and observations from this study may be summarized as follows. • It is necessary to develop an appropriate method that could allocate the costs of transmission services based on the actual usage by different users. • The design of usage-based cost allocation methods involves two major issues: accurate and efficient algorithms for transmission usage evaluation and fair and equitable pricing rules. • Cost allocation procedures should be technically easy for implementation and transparent to transmission users. • As far as the MW flow is concerned, the transaction-related (or generator-related) flows and transmission charges for the recovery of fixed transmission costs determined by different algorithms are quite similar. • The choice of algorithms used for the evaluation of transmission use depends mainly on the study objectives and the market structures. • There is still no a general agreement on the measure of the “extent of use” of transmission network capacity, especially the value of transmission capacity margin and the charge for reactive power flows. REFERENCES [1] A. Zobian and M. D. Ilic, “Unbundling of transmission and ancillary services—Part I: Technical issues and Part II: Cost-based pricing framework,” IEEE Trans. on Power Systems, vol. 12, no. 2, pp. 539–558, May 1997. [2] C. W. Yu and A. K. David, “Pricing transmission services in the context of industry deregulation,” IEEE Trans. on Power Systems, vol. 12, no. 1, pp. 503–510, Feb. 1997. [3] D. Kirschen, R. Allan, and G. Strbac, “Contribution of individual generations to loads and flows,” IEEE Trans. on Power Systems, vol. 12, no. 1, pp. 52–60, Feb. 1997. [4] D. Kirschen and G. Strbac, “Tracing active and reactive power between generators and loads using real and imaginary currents,” IEEE Trans. on Power Systems, to be published. [5] D. Shirmohammadi et al., “Evaluation of transmission network capacity use for wheeling transactions,” IEEE Trans. on Power Systems, vol. 4, no. 4, pp. 1405–1413, Oct. 1989. [6] D. Shirmohammadi et al., “Cost of transmission transactions: An introduction,” IEEE Trans. on Power Systems, vol. 6, no. 4, pp. 1546–1560, Nov. 1991. [7] E. Hirst and B. Kirby, “Creating Competitive Markets for Ancillary Services,” Oak Ridge National Laboratory, Oak Ridge, TN, ORNIJCON-438, Mar. 1997. [8] E. L. Silva, S. E. C. Mesa, and M. Morozowski, “Transmission access pricing to wheeling transactions: A reliability based approach,” IEEE Trans. on Power Systems, vol. 13, no. 4, pp. 1451–1486, Nov. 1998. [9] G. Strbac, D. Kirschen, and S. Ahmed, “Allocating transmission system usage on the basis of traceable contributions of individual generations and loads to flows,” IEEE Trans. on Power Systems, vol. 13, no. 2, pp. 527–534, May 1998. [10] H. H. Happ, “Cost of wheeling methodologies,” IEEE Trans. on Power Systems, vol. 9, no. 1, pp. 147–156, Feb. 1994. [11] H. R. Rudnick, R. Palma, and J. E. Fernandez, “Marginal pricing and supplement cost allocation in transmission open access,” IEEE Trans. on Power Systems, vol. 10, no. 2, pp. 1125–1142, May 1995. 1224 [12] H. Singh and A. Paralexopoulos, “Competitive procurement of ancillary services by an independent system operator,” IEEE Trans. on Power Systems, vol. 14, no. 2, pp. 498–504, May 1999. [13] H. Singh, S. Hao, and A. Paralexopoulos, “Transmission congestion management in competitive electricity markets,” IEEE Transactions on Power Systems, vol. 13, no. 2, pp. 672–680, May 1998. [14] J. Bialek, “Tracing the flow of electricity,” IEE Proc. Gener. Transm. Distrib., vol. 143, no. 4, pp. 313–320, July 1996. , “Elimination of merchandise surplus due to spot pricing of elec[15] tricity,” IEE Proc. Gener. Transm. Distrib., vol. 144, pp. 399–405, 1997. , “Topological generation and load distribution factors for supple[16] ment charge allocation in transmission open access,” IEEE Trans. on Power Systems, vol. 12, no. 3, pp. 1185–1193, Aug. 1997. , “Allocation of transmission supplementary charge to real and [17] reactive loads,” IEEE Trans. on Power Systems, vol. 13, no. 3, pp. 749–754, Aug. 1998. [18] J. W. Marangon Lima, “Allocation of transmission fixed charges: An overview,” IEEE Trans. on Power Systems, vol. 11, no. 3, pp. 1409–1418, Aug. 1996. [19] L. Willis, J. Finney, and G. Ramon, “Computing the cost of unbundled services,” IEEE Computer Applications in Power, pp. 16–21, Oct. 1996. [20] M. D. Ilic et al., “Toward regional transmission provision and its pricing in New England,” Utility Policy, vol. 6, no. 3, pp. 245–256, 1997. [21] M. E. Baran, V. Banunarayanan, and K. E. Garren, “A transaction assessment method for allocation of transmission services,” IEEE Trans. on Power Systems, vol. 14, no. 3, pp. 920–928, Aug. 1999. [22] R. R. Kovacs and A. L. Leverett, “A load flow based method for calculating embedded, incremental and marginal cost of transmission capacity,” IEEE Trans. on Power Systems, vol. 9, no. 1, pp. 272–278, Feb. 1994. [23] S. Hao and A. Papalexopoulos, “Reactive power pricing and management,” IEEE Trans. on Power Systems, vol. 12, no. 1, pp. 95–104, Feb. 1997. [24] Y.-M. Park, J.-B. Park, J.-U. Lim, and J.-R. Won, “An analytical approach for transmission costs allocation in transmission system,” IEEE Trans. on Power Systems, vol. 13, no. 4, pp. 1407–1412, Nov. 1998. IEEE TRANSACTIONS ON POWER SYSTEMS, VOL. 15, NO. 4, NOVEMBER 2000 Jiuping Pan received B.S. and M.S. degrees in power engineering from Shandong University of Technology (SUT), P. R. China. He joined the faculty of SUT in 1982 and is currently completing his Ph.D. degree in electrical engineering at Virginia Tech. His main research interests include generation and transmission planning, power system modeling and analysis, decision-making methods and power system reliability studies. Yonael Teklu received B.S. and M.S. degrees in electrical engineering form Addis Ababa University, Ethiopia, and Virginia Tech in 1981 and 1995 respectively. He is currently working toward a Ph.D. degree at Virginia Tech. His research activities involve energy systems planning, renewable and distributed generation systems. Saifur Rahman (S’75–M’78–SM’87–F’98) is the Director of Alexandria Research Institute at Virginia Tech where he is a Professor of Electrical Engineering. He also directs the Center for Energy and the Global Environment at the university. Dr. Rahman is currently serving on the Power Engineering Society Governing Board as the Vice President for Education/Industry Relations. He serves on several PES committees and subcommittees including the Education Committee, Energy Development Subcommittee and Customer Products and Services Subcommittee. He is also a Member-At-Large of the IEEE-USA Energy Policy Committee. He has published over 200 papers on conventional and renewable energy systems, load forecasting, uncertainty evaluation and system planning. Koda Jun received B.S. and M.S. degrees in electrical engineering from Yokohama National University, Japan, in 1988 and 1990 respectively. He joined Tokyo Electric Power Company in 1990 and is currently a Research Engineer at Mathematical Engineering Group of R&D Center with focus on the methods of real time electricity pricing. From August 1997 to August 1998, he was a Visiting Researcher at Virginia Tech.