MW-Mile Method Considering the Cost of Loss

Allocation for Transmission Pricing

Avinash D.

B. Chalapathi

M. Tech. student, Electrical Engineering Department

National Institute of Technology, Kurukshetra
Haryana, India
avinash.6474@yahoo.co.in

Assi. Prof., Department of Electrical and Electronics

Engineering
GPREC, Kurnool, AP, India
chalam212@gmail.com

Abstract Since the evolution of MW-Mile method there

have been so many new methods for transmission pricing were
developed but still it is been used in most of the places
throughout world because of its simplicity. However this method
does not provide fair pricing for the users since it is lacking in the
provision of cost component for loss and power factor. This
paper tries to provide a mathematical model so that the cost
component of loss and power factor can be added in the
transmission pricing.
KeywordsMW-Mile Method , Cost of Loss Component, Power
Factor, Transmission pricing

I.

INTRODUCTION

The restructuring of power system in many parts of the

world caused changes in transmission pricing and there have
been so many methods proposed. Initially the transmission
capacity allocation and cost of services is proposed in [1]
based on magnitude of electric power and the length of line
this is nothing but referred as MW-Mile method, which is a
kind of embedded pricing method and this is the first method
proposed based on actual usage of transmission network,
before this there was an existing method known as Pro rata
method/Postage stamp method which was modeled using only
the magnitude of the power involved in a transaction [2]
The total transmission pricing methods can be categorized
into 3 types 1) Embedded cost methods 2) Incremental cost
methods 3) Marginal cost based methods. In these embedded
cost methods are mostly used because of its simplicity. Further
these embedded cost methods are divided into 4 types known
as 1) Postage stamp method 2) Rated contract path method 3)
MW-Mile method 4) Power flow based MW-Mile method
[3],[4].
Nodal pricing is another approach for transmission pricing
which is based on the concept of differences of the marginal
prices of nodes but if the network is loss less and there is no
congestion then all the prices at all nodes become equal
making the revenue zero. The main drawback of this method
is that it cannot generate the actual cost of transmission
service cost there by creates loss to the transmission service
provider. There has been several modifications proposed for

nodal pricing methods to increase the revenue but still the

MW-Mile method gives the better cost allocation so as to
recover the operation and investment cost. The two methods
both embedded and marginal have their own advantages and
disadvantages, embedded methods can recover the
transmission cost but they are not providing any economical
signal to the users where as marginal price methods can
provide economical signals and they are having some
mathematical basis but still they cannot fully recover the
transmission cost. In literature several authors tried to solve
this problem by combining both the above methods known as
hybrid methods [5],[6]. Using Ramsay pricing concept the
nodal method has been modified so that it can recover the
transmission cost up to some extent in [7], and to create the
nodal price differences a concept of generation and nodal
injection penalties is introduced in [8]
Using Z bus the cost allocation of transmission service is
presented in [9] but in this the shunt branches of the
transmission lines were not modeled and recently there have
been so many methods proposed based on game theory, which
gives some important concepts, models and methods which
can be used to access the behavior of the agents participated in
the market, optimal power flow tracing, min-max fairness
algorithm using optimization based real power tracing. In [10]
principle of bilateral exchanges is used, where it assigns some
part of generator generation for each load and some part of
load for each generator on proportional basis, which removes
some of the drawbacks of the other methods,
Use of dispersed slack bus is discussed in [11] so as to
remove the difficulty in selection of slack bus in case of
marginal pricing methods which are more sensitive to the
selection of slack bus. There have been several methods
developed to consider the cost component of power factor by
using reactive power parameters, in [12] and [13] papers point
to point method is proposed, in [14] a correction factor is
introduced to account for the cost of power factor to improve
MW-Mile method but it does not consider the cost of loss
component and it mainly relates the change in current
component because of power factor change. This paper is
aimed to consider both the effects of power factor and loss

cost components in the conventional MW-Mile method for

providing better economical signal to the users.
This paper is organized into 3 sections: section 2 describes
about basic MW-Mile method, section 3 presents the proposed
methodology and section 4 gives the conclusion.
II.

This method of transmission pricing is proposed based on

the magnitude of electric power transacted and the length of
the line [1] which is widely used since it gives the measure of
actual usage of transmission line. This method can be
represented as follows
 
,

Where




,


(1)

Transmission cost to user n;

Number of transmission lines;
Cost in $/MW-mile or $/MW-Km which
is already defined;
Length of line i;
Power flow in line i, because of the user n
Power capacity of line i in MW;

Here the total cost for a user n is the summation of cost

components for providing transmission lines which are
involved in the transaction.
III.

PROPOSED METHODOLOGY

The power flow capacity of a line when its resistance is

neglected depends up on the voltages at the ends and the
reactance of the line. Since we use DC load flow in calculation
of MW-Mile method we can assume that the both ends of the
voltages are equal. The equation of power handling capacity
can be written as follows
 =
Where

x
V

V  sin 
(2)
 

Angular difference between the two ends in degrees;

reactance of the line per unit length;
Operating voltage of the line in kV;

Assuming unity power factor the current carrying capacity of

the line  can be calculated as follows


3 #

(3)

By substituting (2) in (3) we get



# sin 
3  

%&& = 3(  ) ' (5)

By substituting (4) in (5) the expression for %&& modifies to

MW-MILE METHOD

 = 

The power loss corresponding to the maximum power

capability in a 3 phase system can be written as follows

(4)

%&& =

#  (sin ) 
(6)
  

Therefore the percentage of power loss expressed in terms of

the power handling capacity of line is as follows
%%&& =

100%&&
100 ' sin 
=
(7)




Considering the stability mostly is limited to certain value

hence by assuming  = 30 the equation (7) can be re written
as follows
50
%%&& =  (8)
/ 0
'
2

For a particular voltage level of a line the /3 0 ratio will be

known to the system operator and there by the percentage of
power loss can be calculated. Since this loss component is in
terms of the power handling capacity we cannot use this
parameter directly in the allocation of cost component of line
loss.
The loss in a line is depending on the actual power flow of
the line, to take this into consideration we introduce a
correction factor for the calculation of %&& which is given by

4 = 5
6 7 (9)


With this modification the power loss in a line can be

expressed as
 = 4%&& (10)
The loss component mentioned above can be added to power
flow component which we get by DC load flow so as to
account for the losses. Hence by applying this method the
transmission cost for a user n can be expressed as follows


 = 9


  ( , + , )
(11)


In [14], a method is proposed to consider the effect of power

factor by introducing a coefficient  ; by which the above
equation can be written as

 =  ; 

  (
, <
=, )

(12)

This modified formula considers both the power factor and the
loss to allocate the transmission pricing. In the calculations it
is assumed that the length of the line is proportional to the
impedance. For a given system initially the full capacities of
2

the lines are calculated, based on /3 0 ratios the loss

percentages are evaluated and then for a particular transaction
the flows in all the lines are found using DC power flow,
based on these flows and using the correction factor K we can
adjust the flows to represent loss component.
IV.

RESULTS

IEEE 14 bus system is considered as the test system and dc

power flow is used to find the power flows. The data is taken
from [4], two transactions T1 and T2 are considered as in [15]
which are given below
T1: Transaction of 20 MW from bus 1 to bus 5
T2: Transaction of 20 MW from bus 2 to bus 14
because of these two transactions the power flow changes
through all the lines, which can be determined by using Power
Transfer Distribution Factors (PTDFs) and also the change in
power flow in each line due to a particular transaction can be
found [16]. Figure I show the PTDFs for transactions T1 and
T2 respectively.

TABLE I. DETAILS OF POWER FLOWS IN IEEE 14 BUS SYSTEM

Lines

Base case
(MW)

1-2
1-5
2-3
2-4
2-5
3-4
4-5
4-7
4-9
5-6
6-11
6-12
6-13
7-8
7-9
9-10
9-14
10-11
12-13
13-14

147.87
71.11
70.04
55.22
40.90
-24.15
-62.33
28.98
16.63
42.08
6.30
7.54
17.03
0
28.98
6.19
9.92
-2.80
1.44
4.97

Base case
with T1
(MW)
160.08
78.90
72.11
59.53
46.73
-22.09
-56.30
29.20
16.75
41.74
6.09
7.51
16.92
0
29.20
6.40
10.05
-2.59
1.44
4.82

Base case
with T2
(MW)
143.98
75.00
73.21
61.85
47.21
-20.98
-64.05
36.30
20.83
50.55
6.88
9.29
23.17
0
36.30
5.61
22.02
-3.38
3.20
12.87

Table II gives the cost of transactions considering several

cases such as without loss component, with loss component,
and the case with power factor variation. The power factors at
load points in the transactions considered are 0.8 and 0.9 (lag)
where as the reference power factor is kept at 0.85 as in [14].
The effect of power factor variation is considered including
the cost of loss component.
TABLE II. COST OF TRANSACTIONS WITH DIFFERENT CASES

Cost without loss

component ($/hr)
Cost with loss
component ($/hr)
Cost at 0.8 pf
($/hr)
Cost at 0.9 pf
($/hr)

T1

T2

88.93

554.84

90.00

597.09

95.62

634.41

85.00

563.89

Fig. 1. PTDF variations for transactions T1 and T2

In calculating the cost of each transaction the cost per p.u

MW mile is taken as 50 $/p.u MW-mile as in [14]. The length
of the transmission lines is taken on the basis of impedance of
the lines and also the negative counter flows are not
considered that gives to an assumption that the transactions are
always increasing the power flow irrespective of their
direction. Table I gives the details of power flows in all the
cases such as base case and base case with transactions.

It can be seen from Table II that the cost component of loss is

less when compared with the cost component of power factor
and also the transaction T2 utilizes most of the transmission
lines from bus 2 to bus 14 hence its transaction cost is very
high compared with the transaction cost of T1. This shows the
dependence of this method on the physical nature of the
network.

V.

CONCLUSIONS

In this paper the effect of counter flows arising because of

simultaneous multi transactions is not considered. When the
counter flows are negative they benefit the transmission
system provider by increasing the transmission system
capacity and also reducing the power loss hence this factor
plays main role in deciding the cost component for losses
hence further work can be done to include negative counter
flows in cost of loss allocation.
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