EUROPEAN TRANSACTIONS ON ELECTRICAL POWER

Euro. Trans. Electr. Power 2007; 17:240254

Published online 30 November 2006 in Wiley InterScience
(www.interscience.wiley.com) DOI: 10.1002/etep.131

Transmission pricing using the exact power and loss

allocation method for bilateral contracts in a deregulated
electricity supply industry
Cattareeya Adsoongnoen1, Weerakorn Ongsakul1,*,y, Christoph Maurer2
and Hans-Jurgen Haubrich2
1

Energy Field of Study, School of Environment, Resources and Development, Asian Institute of Technology,
Pathumthani 12120, Thailand
Institute of Power Systems and Power Economics, RWTH Aachen University, Schinkelstr. 6, 52056 Aachen, Germany

SUMMARY
This paper proposes a new method based on exact power and loss allocation for bilateral transactions under the
enhanced single buyer model in the Thai electricity supply industry (Thai ESI). Generally, a transmission network
is designed to transfer mainly active power. The transmission pricing for this active power charge in the Thai ESI
comprises three components, namely the transmission use-of-system charge, the connection charge, and the
common service charge. However, the calculation of transmission pricing, using marginal cost scheme, might not
ensure revenue requirements of the transmission owner in case of a high reactive power demand in the network
because a part of transmission line capacity is subsequently required for the reactive power transfer. Thus, the
triangle method is used to segregate the transmission pricing by classifying active and reactive charges. The users
are charged regarding their system usages by applying the exact power and loss allocation method. The proposed
transmission pricing sends economic incentives to the users with fair charges. It ensures an investment recovery of
the transmission owner in case of high reactive demand in the network. The Thai power 424-bus network
demonstrates the method exemplarily. Copyright # 2006 John Wiley & Sons, Ltd.
key words:

transmission pricing; reactive transmission pricing; bilateral contract; electricity market; marginal
cost; loss allocation; triangle method

1. INTRODUCTION
The Thai electricity supply industry (Thai ESI) is presently in a transition towards liberalization on the
electricity market. The study of power system restructuring has been done since the early 1990s,
starting with the power generation sector. Different models were proposed during that transition such as
the Thai power pool model proposed in 1999 [1], the new electricity supply arrangement (NESA)
model in 2002 [2], and lastly the enhanced single buyer (ESB) model in 2003 [3,4] that is currently
recommended to apply with the present Thai ESI. The ESB model, as shown in Figure 1, encourages
*Correspondence to: Weerakorn Ongsakul, Energy Field of Study, School of Environment, Resources and Development, Asian
Institute of Technology, Pathumthani 12120, Thailand.
y
E-mail: ongsakul@ait.ac.th

Copyright # 2006 John Wiley & Sons, Ltd.

TRANSMISSION PRICING FOR BILATERAL CONTRACTS

IPPs

EGAT
Gen.

INT.

241

SPP

EGAT Transmission
Single Buyer (SB)

PEA

End User

Direct Customer

MEA

Regulator

SO

Figure 1. The proposed Thai electricity supply industry.

free electricity trading through a bilateral transaction between power generator and large customer. In
this case, both parties absolutely need to use a transmission network to transport electricity from one to
another. A transmission system operator (TSO), who owns the transmission network, has an obligation to
charge for the transmission network usage. Normally, active power physically dominates the electric power
ow in a transmission system. However, reactive power intrinsically affects the transmission
network capacity, especially caused by customers who consume a huge portion of reactive power in
the system. As presently in Thailand, there is no regulation forcing demands to install reactive power
compensators. Therefore, the reactive power demands inuence the transmission capacity for the active
power transfer.
In this paper, the transmission pricing for both active and reactive power is considered. The triangle
method is used to classify both active and reactive power charges. Thus, this method sends intensive
signals towards users to reduce reactive power consumption. The long-run average incremental cost
(LRAIC) pricing scheme [5] is applied for different voltage levels to recover long-term
transmission investment and expansion costs as well as operation and maintenance costs and cost
of loss. Based on the exact power and loss allocation method, the transmission users are levied with fair
charges.

2. ELECTRICITY SUPPLY INDUSTRY MODEL IN THAILAND

2.1. The proposed Thai electricity supply industry structure
The traditional Thai ESI is vertically integrated, called a single buyer model, which covers all facilities
and services for generating, transmitting, and selling electricity to all customers. It comprises three
state-owned enterprises, the Electricity Generating Authority of Thailand (EGAT), the Metropolitan
Electricity Authority (MEA), and the Provincial Electricity Authority (PEA). EGAT owns and operates
the power plants and transmission facilities. It generates and supplies electricity via high voltage
transmission lines to MEA and PEA. MEA is a power distributor for consumers in Bangkok, and its
vicinities, which are Nonthaburi and Samut-Prakarn provinces. PEA is a power distributor responsible
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C. ADSOONGNOEN ET AL.

for consumers in the remaining regions of Thailand. This traditional structure lacks of the competition
and efciency, consequently over investments and low efciency take place in any sectors. The Energy
Policy and Planning Ofce (EPPO), which regulates the three enterprises, has decided to restructure the
traditional Thai ESI.
Since 2003, EPPO has proposed the ESB model aiming to increase efciency-drivers to the common
single buyer model of the Thai ESI. The key objectives of this model are:

Improving security of supply with high grid reliability and adequate generation;

Increasing customer satisfaction; in the generation sector by increasing efciency on the use of
energy and nancial resources, more choices on competition, transparent, and competitive tariffs;
in the customer sector by increasing service quality with stable power prices;

Maintaining social and environment obligations;

Creating national champions with economies of scale consideration; and

Operating with low risk and cost of transition.
In the ESB model shown in Figure 1, the main characteristics of the Thai ESI have been changed.
They are classied into eight issues as follows. (1) EGAT still holds generation and transmission
services. However, there will be an account unbundling of both business units. (2) In the generation
sector, the new capacity will be allocated through the process and the market regulation determined by
the regulator. (3) EGAT retains the transmission network with regulated tariffs and has responsibility
for both network operations and maintenance. The transmission network will be regulated via the Grid
Code and transmission license. (4) The System Operator (SO) will be ring-fenced within EGAT as well
as it will retain obligation for dispatch planning, dispatch, real time balancing and network
operations planning. (5) Single Buyer (SB) will be transparent within transmission service and
responsible for contracting adequate transmission capacity and accountable for long-term system
adequacy planning. (6) MEA and PEA will continue to operate their networks with regulated tariffs via
the Grid Code and distribution license. (7) End user tariffs will continue to be regulated by the
regulator. (8) The Regulator will enforce the Grid Code and generation as well as transmission and
distribution licenses.
This model encourages independent power producers (IPPs) and small power producers (SPPs) to
participate in the generation sector, while it allows large customers to select their own suppliers. Both
of them are able to enter into bilateral contracts, which are individually negotiated between two parties
in order to achieve price stability and to ensure sufcient electricity supply. This method becomes more
efcient and provides market participants more choices while maintaining the operation of a secure and
reliable electricity system. The SO has the function to support for transmission services and a privilege
for transmission service charges.

3. POWER AND LOSS ALLOCATION METHOD FOR BILATERAL CONTRACTS

A bilateral contract is a long-term physical contract between participants to purchase and sale energy.
The transmission network is used to transfer both active and reactive power from a generator as seller to
a load as buyer in a bilateral contract. The transmission power and loss allocation become a major
concern for market participants. In case of Thailand, which has high reactive power consumption, the
transmission owner needs to support a portion of transmission capacity for reactive power delivering. It
decreases the transmission capacity for the active power transfer. Consequently, it needs a charge to the
user, who has a huge reactive power demand. In this section, the exact power and loss allocation for a
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243

bilateral contract in the ESB model are presented. Both active and reactive power allocations are taken
into consideration.

3.1. Review of transmission power/energy and loss allocation methods

In different electricity market environments, many methods have been proposed to allocate power,
energy, and losses for transmission system service charges to make fair charges to market participants.
The load ow based on loss allocation method [6] traces the specic component load ow on a
distribution system. The losses are allocated to customers using the evaluation of loss adjustment
factors at a specic location. However, this method depends on a slack bus. It is only applicable to radial
distribution networks, and has no incentive for loss reduction. Optimal power ow based on
incremental loss evaluation method [7,8] has been applied to the bilateral transaction in a transmission
system that is independent of a slack bus. The concept accounts for the transaction injection charges of
both sending and sinking buses. However, it encounters a transaction-sequence problem. Thus, it is
time-consuming.
In Reference [9], two different sensitivity factors for transmission pricing based on the loss
estimation method have been proposed, called a generalized generation distribution factor and a
generalized load distribution factor, which depend on standard load ow. They have been proposed to
allocate transmission losses and marginal operating costs of individual transaction. The sensitivity
factors are computationally efcient. The loss penalty factor in Reference [10] has been introduced to
evaluate wheeling losses by using a constant nodal matrix and known-operating point. However, it
creates unsatised results for the large system comprising many transactions. Both distribution factors
and loss penalty factor are closely related to a slack bus.
The tracing method is implemented to allocate energy and losses to a particular load and generator. It
is based on proportional-sharing providing signals to recover the transmission network costs while
minimizing distortion and interference of economic efciency [11]. The tracing results have shown that
methodology is simple, fair, and transparent. Therefore, this method has been proposed for the
transmission pricing in the Thai power pool model as given in Reference [12,13]. However, it seems to
be time-consuming for a large system.
A loss distribution based on power ow method has been proposed to calculate transmission losses
and associated costs for bilateral transactions in a deregulated environment [14,15]. The method
achieves a fair loss allocation, and the allocated results are independent of the selecting of slack bus.
Both, positive and negative losses are accounted for leading to economic efciency. However, only
active power and allocated active losses have been considered so far. This paper aims to develop the
reactive power and reactive loss allocation for bilateral contracts. The results are used to calculate the
transmission pricings for active power, reactive power and associated losses.

3.2. The proposed power and loss allocation method

The algorithm to allocate active and reactive power with associated losses for each bilateral transaction
initially takes a Newton-Raphson power ow calculation. Thereafter, the allocation method will be
applied to the transaction. The method starts with an identication of transaction pairs, which consists
of a sending bus and its associated receiving bus. The demand of each transaction must be given.
The ideal transaction pair is self-balancing so that its net power generation is equal to the sum of its
demand and loss. In this paper, a single transaction is simplied. The nodal power balance equations are
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C. ADSOONGNOEN ET AL.

shown in Equations (13).

8
n
P
>
>
> Pk Uk Uj Gkj cos dkj Bkj sin dkj
>
<
j1
n
P
k 2 ns
Qk Uk Uj Gkj sin dkj  Bkj cos dkj
>
>
>
j1
>
:
dkj dk  dj

(1)

8
n
P
>
>
Pm Um Uj Gmj cos dmj Bmj sin dmj
>
>
<
j1
n
P
m 2 nb
Qm Um Uj Gmj sin dmj  Bmj cos dmj
>
>
>
j1
>
:
dmj dm  dj

(2)

8
n
P
>
>
0 Ul Uj Glj cos dlj Blj sin dlj
>
>
<
j1
n
P
l 2 nz
0 Ul Uj Glj sin dlj  Blj cos dlj
>
>
>
j1
>
:
dlj dl  dj

(3)

For each

For each

For each

Transaction pair T consists of a sending bus k and a sinking bus m. The above equations regard classical
power ow model except the generation on the sending side is undecided. Thereafter, the active power and
losses are corporated into transaction balance equation by adding the new constraint as shown in Equation (4).
n
X
For each
T 2 nt PTk
(4)
PTm PTloss
where PTloss is real power loss of transaction T, k 2 fT \ nsg; m 2 fT \ nbg.
To bypass non-linear coupling between active and reactive power ow equations, all power
injections are translated into complex injected currents as:
Ik
Im

Sk
Pk  jQk

;
k 2 ns
U k
Uk ejuk

S
Pm jQm
 m
;
m 2 nb
Um
Um ejum

(5)

Next, the complex branch current component for individual transaction can be calculated as
corresponding to the nodal impedance parameter.
(
)
X
T
I ij yij  I k zik  zjk 
I m zim  zjm
(6)
m2T\nb

The active power loss for individual transaction is determined.

o
X
X n
PTlossij
Re I Tij  U i  U j
PTloss
ij2nl

(7)

ij2nl

Substituting PTloss from Equation (7) into Equation (4), the transaction balance output will be compared
with the previous output. If the results for all transactions are less than the maximum error, the reactive
Copyright # 2006 John Wiley & Sons, Ltd.

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TRANSMISSION PRICING FOR BILATERAL CONTRACTS

245

Initialize transaction pair and transaction balance output in

Equation (4) by assuming that there is no real power loss in
individual transaction
Solve power flow analysis

Solve nodal power balance in Equations (1) (2) and (3)

Solve injected current in Equation (5) and brance current

components imposed by individual transaction in Equation (6)
Solve real power loss incurred by individual transaction in
Equation (7)
Solve again transaction balance in Equation (4) by substituting
active power loss into transaction balance equation

No

Does
the transaction output Pk match the previous
output Pk-1 ?
Yes
Solve reactive power loss and reactive power transaction in
Equation (8)
Display power flow outputs, and power and loss allocation
solution

Figure 2. Flow chart of transaction power and loss allocation.

power consumption QTloss for each transaction is calculated in an analogous way as given in
Equation (8).
QTloss

X
ij2nl

QTlossij 

n
o
Im I Tij  U i  U j

(8)

ij2nl

The ow chart in Figure 2 shows the transaction power and loss allocation.

4. TRANSMISSION PRICING FOR BILATERAL CONTRACT IN THE ESB MODEL

The transmission pricing based on the marginal cost method is applied to the bilateral contract in the
ESB model. This pricing scheme is divided into three categories. Firstly, the transmission
use-of-system (TUOS) charge is used to recover all transmission network costs including operating and
maintenance costs and costs of losses. Secondly, the connection charge is intended to recover costs of
providing and maintaining connection assets. Lastly, the common service charge is levied for metering
costs such as billing and collection.
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Table I. Marginal transmission losses.

Voltage level

Energy loss (% of Energy at Entry)

Generator to exit 500:230 kV

Exit 500:230 kV to exit 230:115/69 kV
Exit 230:115 kV to end 115 kV lines
End 115 kV lines to exit 115:MV

On-peak

Off-peak

3.64%
0.30%
3.39%
0.23%

2.42%
0.20%
2.26%
0.15%

4.1. The transmission use-of-system charge (TUOS)

The TUOS charge reects network investments and operating costs. This charge involves power and
loss charges paid by customers at the extracting points. LRAIC is proposed to determine the
transmission tariffs. There are the uniform tariffs for different voltage levels based on a cost-roll-over
method, which take the marginal capacity costs and the marginal transmission losses into account. The
marginal transmission losses for different voltage levels are given in Table I. LRAIC is calculated as
given in Equation (9).
LRAICi

CTi
DMi

(9)

where DMi is a discounted projection of new demands at each voltage level for future years, CTi is a
discounted optimal-incremental investment required to meet the new demand, and i is the voltage level.
These costs should be allocated between 9 a.m. and 10 p.m., the peak period at all weekdays (except
public holidays) over all months of the year. The calculation is based on the basis of 20-year payback
with 7% discount rate and currency exchange rate of 36 BHT 1 USD. The detailed data of LRAIC
calculation is given in Reference [5]. The LRAIC results are shown in Table II for each voltage level.
These tariffs consider only active power charge based on an average EGATs system power factor 0.8.
However, this system contains high reactive loads, which requires a portion of transmission capacities. As
a result, only active power charge cannot achieve the expected revenue requirement. Thus, this paper
extends the transmission use-of-system charge to the reactive power pricing. The authors propose the
triangle method to allocate active power and reactive power charges (MW- and MVar-charges).
4.2. Triangle method
The idea of this method is that the total costs of transmission networks are used to supply MVA ow,
thus the costs can be allocated regarding the portions of their capacities for the active and reactive
power transfers as shown in Figure 3.
Table II. LRAIC results of the Thai power 424-bus system.
Voltage level

Generator to exit 500:230 kV

Exit 500:230 kV to exit 230:115/69 kV
Exit 230:115 kV to end 115 kV lines
End 115 kV lines to exit 115:MV
Copyright # 2006 John Wiley & Sons, Ltd.

Cost per (kW a)

Cost per (kWh  a)

BHT

USD

BHT

USD

939
747
1173
573

26.1
20.8
32.6
15.9

0.36
0.28
0.45
0.22

0.99
0.79
1.24
0.61

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TRANSMISSION PRICING FOR BILATERAL CONTRACTS

Cost (Q)

)
Q
st (
o
C

P)
st (
o
C

Cost (P)

Figure 3. Triangle method for the active and reactive power allocation.

The complex power is separated to be active and reactive power by using the relationship
S2 P2 Q2. Assuming that the total transmission costs based on MVA, Cost (S) can also be
transformed into both costs supporting active power transfer, Cost (P) and reactive power transfer,Cost
(Q) as given in Equations (10) and (11).


P
CostP CostS
(10)
S
and
p!
S2  P 2
Cost Q Cost S
S

(11)

From the equations above, we obtain the cost-relation result as Cost (P) Cost (Q) i Cost (S), which is
unreasonable because the total revenue from active and reactive power transfer is greater than the total
costs of the transmission network. Thus, the cosine rule in Equation (12) is applied to allocate the new
costs, which would not exceed the total revenue requirement. The new allocated costs for active and
reactive power transfer are expressed in Equations (13) and (14).
2

cos u sin2 u 1

(12)
2

CostP0 CostS  cos u

(13)

CostQ0 CostS  sin2 u

(14)

Using Equations (13) and (14), LRAIC is reallocated with the power factor 0.8. The new LRAIC for
active power and reactive power transfer are shown in Tables III and IV, respectively.
Table III. The allocated LRAIC for active power transfer.
Voltage level

Generator to exit 500:230 kV

Exit 500:230 kV to exit 230:115/69 kV
Exit 230:115 kV to end 115 kV lines
End 115 kV lines to exit 115:MV
Copyright # 2006 John Wiley & Sons, Ltd.

Cost per (kW a)

Cost per (kWh  a)

BHT

USD

BHT

USD

752
598
939
458

20.9
16.6
26.1
12.7

0.29
0.23
0.36
0.17

0.79
0.63
0.99
0.48

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Table IV. The allocated LRAIC for reactive power transfer.

Cost per (kVar  a)

Voltage level

Generator to exit 500:230 kV

Exit 500:230 kV to exit 230:115/69 kV
Exit 230:115 kV to end 115 kV lines
End 115 kV lines to exit 115:MV

Cost per (kVarh  a)

BHT

USD

BHT

USD

423
336
528
258

11.7
9.3
14.7
7.2

0.16
0.13
0.20
0.10

0.45
0.36
0.56
0.27

4.3. Connection charge

This charge is invariant with the usage, thus it should be a xed charge levying on the connected users.
The calculation of estimated annual connection charges associated with specic assets are 50,000
BHT/(MVA  a) for connections at the 230 kV, 115 kV and 69 kV levels, which are based on an
estimated substation investment of 90 MBHT for a 200 MVA capacity increment, and 100,000 BHT/
(MVA  a) for connections at the 33 kV and 22 kV levels, which are based on an estimated substation
investment of 45 MBHT for a 50 MVA capacity increment. More details are given in Reference [5].
4.4. Common service charge
This charge is xed on every transmission users. The annual connection service charge is 135,000 BHT
per user for metering costs including capital, operating, and maintaining costs of current and voltage
transformers.

5. NUMERICAL EXAMPLE, RESULTS, AND DISCUSSIONS

5.1. Power and loss allocation
The Thai power 424-bus system is used to demonstrate the effectiveness of the proposed method. The
system consists of 424 buses, 466 lines, 278 transformers, and 146 generators. It is assumed that there
are 10 simultaneous transactions in this ESB model. The details of each transaction are given in
Table V. The results of transactions are received by using the exact power and loss allocation method.
The simulation results are presented in Table VI.
The allocated active power results are discussed as follows:

Transaction 1, as an example for a short distance transaction, causes small losses of 0.435 MW.
The total generation (126.325 MW) is equal to the total demand (125.890 MW) including related
losses (0.435 MW), which is consistent with engineering intuitions.

Transactions 2 and 9, as longer distance transactions, produce higher transmission losses of
10.968 MW and 11.391 MW. That means longer distance causes higher losses.

Transaction 6, as a long distance transaction and located in the south region in Thailand with the
highly loaded transmission capacity, causes huge amount of losses of 11.177 MW.

If Transaction 8 is added in the network, it is associated negative losses of 1.535 MW. That
means this transaction produces counter-ows to reduce the total transmission losses in the
network. As a result, this transaction will get a benet to the transmission usage charge due to the
loss reduction. The residual transactions can be discussed in the same way.
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Table V. The transaction pairs data of the base case in the 424 bus Thai power system.
Transaction
number
1
2
3
4
5
6
7
8
9
10

Transaction
capacity (MVA)
140
80
135
10
290
130
180
90
90
290

Sending bus

Sinking bus

Bus number

Bus name

Volt (kV)

Bus number

Bus name

Volt (kV)

339
395
286
383
278
274
392
400
366
378

RB-C1
RY-C1
MM-T7
COCO-T1
MM-T9
RPB-H1
WN-C3
TOP-T1
HH-H2
BCC-T1

230
230
230
115
230
230
230
230
230
115

105
129
194
341
17
39
62
73
150
332

RB2
BL
CM2
SKA
TA2-230
HY2-230
CHW-230
CP
NR2
SNR

115
115
115
115
230
230
230
115
230
115

The active power results provide economic incentives since the transactions generate either positive
or negative losses as the increasing or decreasing total system losses. Moreover, the allocated losses
reect both amount and distance of the transactions that means higher demand causes higher losses, and
longer distance causes higher losses. This allocation method utilizes transaction pairs to nd the
operating point, where power balance is maintained. The allocated active results are further used to
calculate the TUOS charge in the next section.
For the reactive power balance, due to strong local effects of reactive power, it is invalid to assume
that a sending bus delivers reactive power to associated sinking buses. In order to maintain a terminal
voltage level, some generators are forced to supply neighboring reactive loads, which might not be
included in their transactions. Furthermore, transmission lines can generate reactive line charging,
which may or may not benet the transactions. Thereby, it is difcult to allocate similarly
reactive transmission losses as the active power balance equation as given in Equation (4). Thus,
this paper proposes the reactive transmission charge only to the reactive loads without
reactive losses as calculated in Equation (8). The charges for extra reactive power
generation and consumption should be distributed to all market players, which are not discussed in
this paper.
Table VI. The transaction power and losses allocation.
Transaction
number

Pk (MW)

Pm (MW)

Ploss (MW)

Qk (MVar)

Qm (MVar)

Qloss (MVar)

1
2
3
4
5
6
7
8
9
10
Total

126.325
87.158
49.357
5.292
57.116
39.177
103.950
20.865
64.891
45.549
599.680

125.890
76.190
45.000
3.300
50.000
28.000
95.800
22.400
53.500
40.500
540.580

0.435
10.968
4.357
1.992
7.116
11.177
8.150
1.535
11.391
5.049
59.101

49.162
11.184
124.055
8.664
282.262
124.051
146.483
83.015
69.910
282.262
1141.352

39.500
27.000
14.490
0.000
28.890
50.000
13.100
3.500
19.200
14.900
210.580

0.431
8.792
3.467
0.180
7.371
16.181
4.126
6.012
7.665
7.533
60.895

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Table VII. The TUOS charge results.

Transaction number

Sinking bus
Bus number

1
2
3
4
5
6
7
8
9
10

105
129
194
341
17
39
62
73
150
332

Pm Ploss (MW)

MW-Charge
(MBHT)

Qm
(MVar)

MVar-Charge
(MBHT)

126.325
87.158
49.357
5.292
57.116
39.177
103.950
20.865
64.891
45.549

118.619
81.841
46.346
4.969
34.155
23.428
62.162
19.592
38.805
42.771

39.500
27.000
14.490
0.000
28.890
50.000
13.100
3.500
19.200
14.900

20.856
14.256
7.651
0.000
9.707
16.800
4.402
1.848
6.451
7.867

5.2. Transmission charges

The transmission charges are calculated by applying the results of the exact transaction power and loss
allocation and the LRAIC tariffs at the point of connection. The three different charges are discussed as
follows.
5.2.1. The transmission use-of-system charge. This charge levies only to customers at their
withdrawing point. The active and reactive power charges for each transaction are considered. The
customers will be charged for the active charge as amount of Pm Ploss while the reactive charge as
amount of Qm.
For example, in Transaction No. 1, the buyer RB2 consumes 125.89 MW with 0.435 MW losses at
115 kV level. The MW-tariff at 115 kV is 939 BHT/kW. Then the TUOS charge for active power of RB2
is equal to 118.619 MBHT. Similarly, RB2 consumes 39.5 MVar at 115 kV level with the MVar-tariff
528 BHT/kVar. Consequently, RB2 pays the TUOS charge for reactive power as amount of
20.856 MBHT. The TUOS charges of all transactions are similarly calculated. The results are given in
Table VII.
Table VIII. The connection charge results.
Transaction number

1
2
3
4
5
6
7
8
9
10

Sending bus

Sinking bus

Bus
number

Connection
charge (MBHT a)

Bus
number

Connection
charge (MBHT a)

339
395
286
383
278
274
392
400
366
378

7.00
4.00
6.75
0.50
14.50
6.50
9.00
4.50
4.50
14.50

105
129
194
341
17
39
62
73
150
332

7.00
4.00
6.75
0.50
14.50
6.50
9.00
4.50
4.50
14.50

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TRANSMISSION PRICING FOR BILATERAL CONTRACTS

251

5.2.2. The connection charge. The costs of connection are based on the costs of facilities that are used
to join the transmission users with the network. Therefore, both sellers and buyers are willing to pay for
these connection charges. The connection charge is based on the annual maximum MVA of each
transaction. As presented in Table V, all users are connected at the voltage levels 115 kV and 230 kV.
Therefore, the connection tariff is 50 000 BHT/(MVA  a). The connection charge results are calculated
by multiplying this tariff with the committed transaction capacity in Table V. The results are given in
Table VIII.
5.2.3. The common service charge. As mentioned in Section 4.3, all users pay for this service charge
135 000 BHT annually to cover the metering, billing, and collection services.
6. CONCLUSIONS
This paper presents a transmission pricing for the bilateral market in the Thai ESI. The transmission
pricing comprises three categories as the transmission use-of-system charge, the connection charge,
and the common service charge. The transmission use-of-system charge is determined by using the
exact power and loss allocation method and the triangle method for active and reactive power transfers
committed by transaction pairs in the bilateral market to recover the related network costs. Then active
and reactive transmission charges for each transaction are allocated. Similarly, the connection charge
and the common service charge are used to recover the residual facilities costs and the costs of
administration. The users are charged regarding their system usage. To examine its effectiveness, the
proposed method is applied to the Thai 424-bus system. The simulation results prove that the proposed
pricing method for the use-of-system charge sends correct economic incentives to the users by
penalizing long distance transfer over highly loaded lines and rewarding transfer that reduces network
loading and system losses. Moreover, the tariffs fairly reect the effects on both quantities and distance
of any transaction. Similarly, the other charges collect the residual annually xed costs.

7. LIST OF SYMBOLS, SUBSCRIPTS, AND ABBREVIATIONS

Symbols
a
per year
n
set of all bus in the system (n nz nb ns)
ns
set of sending buses
nb
set of sinking buses
nz
set of nodes with zero net injection
nl
set of all branches (lines and transformers)
nt
set of bilateral transactions
X
complex number

conjugation
X
U
voltage
S
bus power
P
active power
Q
reactive power
I
injection current
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252
y
z
Cost
CT
DM

C. ADSOONGNOEN ET AL.

admittance
impedance
cost
discounted incremental investment
discounted projection of new demand

Subscripts
i,j,k,l,n,m
loss
T
d, u

identied buses
loss
bilateral transaction
angle

Abbreviations
BHT
Thai Baht
EGAT
Electricity Generating Authority of Thailand
EPPO
Energy Policy and Planning Ofce
ESB
Enhanced single buyer
ESI
Electricity supply industry
IPP
Independent power producer
LRAIC
Long run average incremental cost
MEA
Metropolitan Electricity Authority
NESA
New electricity supply arrangement
PEA
Provincial Electricity Authority
SB
Single buyer
SO
System operator
SPP
Small power producer
TSO
Transmission system operator
TUOS
Transmission use-of-system

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AUTHORS BIOGRAPHIES

Cattareeya Adsoongnoen was born in Nakhon Ratchasima, Thailand in 1976. She received
her B.Eng. degree from Khon Kaen University, Khon Kaen, Thailand in 1998 and M.Eng.
degree from Asian Institute of Technology, Thailand in 2002. She is a lecturer at Faculty of
Engineering, Naresuan University. Currently, she is a doctoral student in Energy Field of
Study, School of Environment, Resources and Development, Asian Institute of Technology,
Thailand, and the exchange student under joint supervision at the Institute of Power Systems
and Power Economics, RWTH Aachen University, Germany. Her research interests include
electricity market, power economics and transmission pricing. Her address is Institute of
Power Systems and Power Economics, RWTH Aachen University, Schinkelstr.6, Aachen
52056, Germany.

Weerakorn Ongsakul was born in Thailand in 1967. He received his B.Eng. degree from
Chulalongkorn University, Bangkok, Thailand in 1988, and M.S. degree in 1991 and Ph.D.
degree in 1994 in Electrical Engineering from Texas A&M University, College Station,
Texas, USA. Currently, he is an Associate Professor at the Energy Field of Study, Asian
Institute of Technology, Thailand. His interests are in computer applications to power system,
parallel processing applications, AI applications to power systems, and power system
restructuring and deregulation. His address is Energy Field of Study, School of Environment,
Resources and Development, Asian Institute of Technology, Pathumthani 12120, Thailand.

Christoph Maurer was born in Mayen, Germany in 1977. He is the chief engineer at the
Institute of Power Systems and Power Economics, RWTH Aachen University, Germany. He
received his Dipl.-Ing. in 2001 and Dr.-Ing. in 2004 from RWTH Aachen University, and
Dipl.-Wirt.-Ing. in 2005 from Hagen University. His research interests are in the optimization
techniques for network planning and operation, regulation and development of electricity
markets. His address is Institute of Power Systems and Power Economics, RWTH Aachen
University, Schinkelstr.6, Aachen 52056, Germany.

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254

C. ADSOONGNOEN ET AL.

Hans-Jurgen Haubrich was born in Montabaur, Germany in 1941. He received his Dipl.-Ing.
from Darmstadt University of Technology in 1965. Thereafter, he was a member of scientic
staff at the Institute of Electrical Energy Supply of Darmstadt University of Technology where
he received his Dr.-Ing. in 1971. During 19711973, he was a freelancer for Brown Bovery
AG, Mannheim, Germany and during 19731998 he was member of the VEW staff,
Dortmund, Germany, nally as the head of the Central Planning Department. In 1985 he
was appointed as a honorary professor at University Bochum. Since 1990 he has been the
Professor and the head of the Institute of Power Systems and Power Economics at RWTH
Aachen University. Since 1997 he is an additional member of the Academy of Science of the
federal state North-Rhine Westphalia and since 2003 he has been the director of the
Forschungsgemeinschaft fur Elektrische Anlagen und Stromwirtschaft e.V. (FGH), Mannheim.

Copyright # 2006 John Wiley & Sons, Ltd.

Euro. Trans. Electr. Power 2007; 17:240254

DOI: 10.1002/etep