Introduction to

Network Pricing
Prof. Narayana Prasad Padhy
Electrical Engineering Department
IIT Roorkee

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Outline
Distribution Use of System Charges.
Existing DUoS Charging Methodologies.
MW-Miles DUoS Charging Methodology-Drawbacks.
MVA-Miles DUoS Charging Methodology-Drawbacks.
MW+MVAr-Miles DUoS Charging Methodology.
Comparative Analysis of the Various DUoS Charging Algorithm
Necessity of AC-DC Load-Flow Algorithm for DUoS Calculations.
Conclusion.
References.

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 Distribution Use of System Charges
Distribution Use of System (DUoS) charges apply to every connection to the
distribution network and collect the revenue the Distribution Licensee needs to
build, operate, maintain, repair and invest in the network.

DUoS Charges are not invoiced directly to the customer: the Distribution Network
Operator (DNO) invoices the customer’s Supplier.

The DUoS charge is an enduring charge invoiced monthly by the DNO to the
customer’s Supplier in order to recover the allowed costs associated with providing
the electricity distribution network. The Supplier incorporates this within a
customer’s final supply bill.

DUoS charges are one component of a customer’s electricity bill and typically
represent around 15% for a domestic customer.

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 Existing DUoS Charging Methodologies
Most of the existing DUoS charging methodologies are power flow based. They are mainly
classified in three categories:

 MW-Miles based DUoS charging Methodology [1]-[3].

The MW-Miles methodology acknowledges the effectiveness of network usage (due to real
power) by consumers.
MVAr-Miles based DUoS charging Methodology [4]-[5].
The MVA-Miles method is an advanced pricing scheme as compared to MW-Miles. It accounts
for the amount of network usage by consumers and also considers the real and reactive
powers, whether injected or consumed simultaneously.
MW+MVAr-Miles based DUoS charging Methodology [6].
The MW+MVAr-Miles method [24] is used for pricing real and reactive power separately taking
into consideration the distance, direction and magnitude they travel to support the customers
and customers impact on system power factor.
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 MW-Miles DUoS Charging Methodology-Drawback

The MW-Miles methodology acknowledges the effectiveness of network usage

(due to real power) by consumers.

It fails to assess the cost/benefit to the network due to reactive power.

A considerable proportion of distributed generators are wind farms, where the

reactive power drawn can be significant.

if only active power flow is considered in a DUoS charging method, it will credit
wind generator for its active power injection, but fails to penalize for its reactive
power drawn from the network, leading to misleading locational signal.

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 MVA-Miles DUoS Charging Methodology-Drawback
The MVA-miles method is considered as a better alternative to MW-miles method
[22]-[23].

It works well in scenarios where there is simultaneous energy generation and
consumption at various levels.

It also keeps track of the net real and reactive power flows in the system.

 However, the direction of flows cannot be ascertained by this method e.g. in the
case of wind generators, where real power is injected and reactive power is
simultaneously withdrawn, it fails to detect the direction of power flows which may
result in false pricing.

Hence an advanced DUoS charging methodology is required.

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 MW+MVAr-Miles DUoS Charging Methodology
The MW+MVAr-Miles DUoS charging methodology has overcome the limitations of
MW-Miles and MVA-Miles methods.

The MW+MVAr-Miles method is used for pricing real and reactive power
separately taking into consideration the distance, direction and magnitude they
travel to support the customers and customers impact on system power factor.

 Hence to analyse the impact of wind generations on the DUoS charges, this
method is most appropriate when compared with above mentioned methods

This pricing mechanism is much more advanced compared to MW-Miles and MVA-
Miles based DUoS charging methodology.

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 MW+MVAr-Miles DUoS Charging Methodology
The cost to support the customer’s real power is:
 ( MW f )T  L f  P f  cos( f )  U f
NC T , P 
f

Pf
AC f
Uf 
S( f )
AC f  The annuity cost of facility f associated
with a capcity S f .
L f  Length of facilyty f .
The cost to support the customer’s reactive power is:
 ( MVAr f )T  L f  Q f  sin( f )  U f
NC T ,Q 
f

Qf
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 Comparative Analysis of the Various DUoS Charging Algorithm
Case A: Distribution system with demand customer only
Use of network charges
Method Net Recovery DUoS Charges
(£/yr)
MW-Miles 78131 0.300 (£/MWh)

MVA-Miles 112995 0.300(£/MVAh)

MW+MVAr- 112728 0.208(£/MWh)

Miles
0.215(£/MVArh)

As evident from the test results that the net recovery using MW-Miles model is a small proportion of total
network annuity cost as it considers real power only, leaving large unrecovered revenue to be allocated in an
uneconomical approach.

Both MVA-miles and MW+MVAr-Miles recover significantly higher revenue as both real and reactive power
are taken into consideration
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 Comparative Analysis of the Various DUoS Charging Algorithm
Case B: Distribution system with wind generation injecting (20-j20) MVA power to
the network
DUoS charging calculations
Method Net DUoS Charges DUoS Charges
Recovery (Loads) (DG)
(£/yr)
MW-Miles 25518 0.300 (£/MWh) -0.300 (£/MWh)

MVA-Miles 38589 0.300(£/MVAh) -0.300(£/MVAh) (375.87+ j246.13)

MW+MVAr- 100375 0.0570(£/MWh) -0.0570(£/MWh) MVA
Miles
0.294(£/MVArh) 0.294(£/MVArh)

It is quite obvious from the load flow result that , the real power flowing through the facility f has been
reduced , hence , DG should be credited for its active power injection to the network.
On the other hand, the system loading has been increased by 21% due to reactive power drawn by the
DG from the network and hence charges should be levied on the DG for its reactive power withdrawal. 10
 Comparative Analysis of the Various DUoS Charging Algorithm
Case B: Distribution system with wind generation injecting (20-j20) MVA power to
the network (continued...)

The MW-Miles method credits the DG for its real power injection but fails to penalise for its reactive power
drawn from the network, leading to a favourable appraisal for the DG.

The MVA-Miles method accounts for the amount of network usage by consumers and also considers the real
and reactive powers, whether injected or consumed.

The MVA-Miles method however fails to distinguish between the direction of real and reactive power flow and
as a result, it credits the DG for both its real power injection to and reactive power drawn from the network.
Hence, leads to false network charging.

The MW+MVAr-Miles method is capable to admire both cost and benefit of network users, especially DGs.

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 Comparative Analysis of the Various DUoS Charging Algorithm
Case C: Distribution system with wind generation injecting (80-j20) MVA power to the
network
DUoS charging calculations
Method Net DUoS Charges DUoS Charges
Recovery (Loads) (DG)
(£/yr)
MW-Miles 132349 0.300 (£/MWh) -0.300 (£/MWh)
(375.87+ j246.13)
MVA-Miles 103935 0.300(£/MVAh) -0.300(£/MVAh) MVA

MW+MVAr- 188018 0.2071(£/MWh) -0.2071(£/MWh)

Miles
0.216(£/MVArh) 0.216(£/MVArh)

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 Comparative Analysis of the Various DUoS Charging Algorithm
Case C: Distribution system with wind generation injecting (80-j20) MVA power to the
network (continued.....)
The loading level of the supporting facility f is increased by 40% owing to the DG’s real power injection as
well as reactive power withdrawn.

 Consequently, remunerations should be paid by DG to the distribution network operator for its active
power injection.

 In addition, charges should be levied on DG for its reactive power drawn from the test network.

The MW-Miles DUoS charging scheme did not penalize customer for its reactive power drawn from the
network. Hence, the revenue recoveries from both demand and generating customer is low.

The MVA-Miles scheme fails to detect the direction of power flows, leading to over-credit the demand
consumers.

On the contrary, the MW+MVAr-Miles network charging methodology is proficient in charging the DG for
its active power injection and reactive power withdrawal.

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 Comparative Analysis of the Various DUoS Charging Algorithm
Case D: Distribution system with wind generation injecting (20+j20) MVA power to the
network
DUoS charging calculations
Method Net DUoS Charges DUoS Charges
Recovery (Loads) (DG)
(£/yr)
MW-Miles 25518 0.300 (£/MWh) -0.300 (£/MWh)
MVA-Miles 38589 0.300(£/MVAh) -0.300(£/MVAh)
(375.87+ j246.13)
MW+MVAr- 38536 0.1996(£/MWh) -0.1996(£/MWh)
MVA
Miles
0.224(£/MVArh) -0.224(£/MVArh)

In this case, the DG is injecting (20+20) MVA to the network, supporting the load customer for its active
and reactive power perquisite leading to drop in system loading level.
Consequently, remuneration has been paid to DG for both active and reactive power injection when using
MVA-Miles and MW+MVAr-Miles where as using MW-Miles method DG has been credited for its real power
injection to the network only.
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 Necessity of Load-Flow Algorithm for DUoS Calculations
Why Load-Flow is Required ?
 An efficient load flow algorithm for distribution network is required for
obtaining the exact power flows through each facility.

Power flow is required for obtaining the net chargeable costs due to real and
reactive power flows in the lines.

 An efficient load flow strategy for distribution systems has been developed
in [7].

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 Conclusion
MW+MVAr-Miles charging methodology that reflects three key cost drivers in the network development:
1. The distance used to support nodal real and reactive power injection/withdrawal.
2. The degree of support offered by the network assets.
3. The condition of the supporting network assets in terms of their operating power factor.

The inclusion of the third cost driver allows the developed charging methodology to reward network users
who improve power factors and network utilization while penalizing those users who worsen power factors
and network utilization.

In addition, the separation of real and reactive power pricing could give network users clearer indications
of the cost of their respective real and reactive power draw from the network, which in turn could help
them to evaluate the economics in investing in reactive power compensation devices.

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 References
1. D. Shirmohammadi, C. Rajgopalan, E. R. Alward, and C. L. Thomas, “Cost of transmission transactions:
An introduction,” IEEE Trans.Power Syst., vol. 6, no. 3, pp. 1006–1016, Aug. 1991.
2. P.Williams and G. Strbac, “Costing and pricing of electricity distribution services,” Power Eng. J., pp.
125–136, Jun. 2001.
3. P. Jesus et al., “Uniform marginal pricing for the remuneration of distribution networks,” IEEE Trans.
Power Syst., vol. 20, no. 3, pp.1302–1310, Aug. 2005.
4. A. M. L. da Silva, J. G. de Carvalho Costa and L. H. Lopes Lima, “A new methodology for cost allocation
of transmission systems in interconnected energy markets, ” IEEE Transactions on Power Systems, vol.
28, no. 2, pp. 740-748, May 2013.
5. J. Bialek, “Allocation of transmission supplementary charge to real and reactive power loads,” IEEE
Trans. Power Syst., vol. 13, no. 3, pp. 749–754, Aug. 1998.
6. F.Li, N.P.Padhy, J.Wang and B.K Kuri, “Cost-benefit reflective distribution charging methodology,” IEEE
Trans.Power Syst., vol.23,no. 1,pp.58-64,feb.2008.
7. Krishna Murari and Narayana Prasad Padhy “ An Efficient Graphical Method for Load Flow Solutions of
Distribution Systems”, Arabian Journal for Science and Engineering(Springer), Vol.1, No.1, Feb.2018, pp.
1-18.

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Thank You

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