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Transmission use charges including reliability costs

Most transmission use charges today reflect existing transmission owning and operating costs only and in particular do not directly include costs associated with system reliability. Rather, reliability is dealt with separately and indirectly through the establishment of available transfer capabilities for existing systems and by a planning and regulatory approval process for the addition of transmission capacity. Therefore, system reliability is not considered on the same economic basis as other transmission costs. This approach may lead, under the economic pressures of deregulation, to degraded system reliability. In this paper, the authors propose a transmission use charge which reflects both owning and operating costs and the costs of unreliability. An expansion fund has also been introduced to provide an economic incentive for transmission system expansion to improve system reliability. The combination of the unified transmission use charge and expansion fund should provide price signals encouraging both the proper use of the transmission system in the near term and the expansion of the network over time for the overall benefit of consumers. The proposed method is illustrated using a sample system.