Allocating congestion management costs through use-based principle of Equivalent Bilateral Exchanges

Abstract

A new strategy is presented for the allocation of costs related to electric network congestion management. It is based on the principle of Equivalent Bilateral Exchanges - EBE which incorporates the concept of ldquopay-as-usedrdquo into the process, allowing to identify the costs to be imputed to each agent taking into account its physical position in the network and its individual use of the transmission lines. It is applied to two congestion management costs: ldquocongestion upliftrdquo and ldquorevenue inadequacy from point-to-point Financial Transmission Rights and Flow Gate Rights marketsrdquo. The EBE method is compared with the usual Pro - Rata calculation and also the Proportional Sharing Principle for the allocation of the two congestion management additional charges. The analyses are based on simulations using 3, 5 and 30 bus example systems. The results demonstrate that the proposed strategy is consistent and mitigates the cross subsidies inherent in other methods.