Electricity Market Transmission System Pricing - Wheeling Rates

Exhibitor: Leng Koon Kum

Supervisor: Zhao Dong

Research Group: Complex and Intelligent Systems

Industry Sector: Energy and Utilities

Since the mid-1980s, the electric power industry has been going through many rapid and fundamental changes. Deregulation of the power industry is a common phrase that is often used and has been a major trend in the industry. Many have come to terms with the benefits of deregulation, and the profound changes and impacts it brings along. Nations all over the world have committed to, or currently in the process of introducing more competition into their power industries. The idea of Open Transmission Access (OTA), which was once debated, is currently being implemented. Under OTA, unbundled transmission companies will provide power market participants with non-discriminatory access to its transmission services. As a result, the power market has seen a major trend towards power retailing. This is where Power Wheeling comes about.

Wheeling can be defined as the transmission of electrical power and reactive power from a seller to a buyer through a transmission network owned by a third party (wheeling utility). It has been strongly accepted that wheeling utilities have to be paid for providing such services. Wheeling rates are the prices the wheeling utilities charge for use of its network. There has been an on-going debate on the optimal method in evaluating wheeling rates. Determining wheeling rates is an area of intense research as all the currently proposed methods have its reservations.

The author seeks to investigate the various methods used in the market in the pricing of wheeling transactions. Some of the commonly found methodologies such as Embedded cost-based, Incremental cost-based, Marginal cost-based will be examined closely to review their pros and cons. The author will also probe into the various power markets in the world today and provides an overview of the changes and impacts of deregulation faced by these markets

Finally, two case studies will be implemented to review two different approaches in determining wheeling rates. The first approach used MW-Mile on an 8-bus transmission network system while the latter adopt a Short-Run Marginal Cost method to evaluate the wheeling rates. It shows the differences in the recovery of the costs incurred by the wheeling utility. In conclusion, this thesis serve as an evaluation of the methodologies currently adopted and practiced in the markets. Future work to be done includes determining the optimal wheeling rates to be charge by utilities in providing wheeling transactions.

Thesis Document (PDF)