INTRODUCTION

In the proficient power market, it is compulsory to extend an apt pricing system that can
offer the practical economic information to market participants, likes: generation transmission
companies and customer. Proper pricing method is needed for transmission network to ensure
reliability and secure operation of power system. Precisely estimating and assigning the
transmission cost in the transmission pricing scheme still lingers as a challenging task. Due to
some issues need to be considered in cost-based transmission expansion. First issue is the
amount of transmission expansion needed. Second is the way of cost should be shared
between the users[1]. These issues need to be considered before planning the transmission
expansion in power system. Now, we discuss the methods to allocate the cost of transmission.
Before we precede our discussion, we need to understand the cost allocation requirement that
needed in the transmission system. First and foremost, regional transmission planning process
must have a regional cost allocation method for new transmission facility selected in the
regional transmission plan for purpose of cost allocation. Note that, cost allocation method must
satisfy six regional cost allocation principles. Then, neighboring transmission planning region
must have a common interregional cost allocation method for a new interregional transmission
facility that regions select. Last but not least, participant-funding of new transmission facilities is
permitted, but is not allowed as the regional or interregional cost allocation method[2]. Back to
our discussion, some methods are Postage stamps method, Contract path method and MW-
Mile method[3].
 CONTENTS

From the list that had been mentioned above, we tried to apply embedded method of
transmission cost allocation to the Malaysia power system. In the embedded methods all
system costs, existing transmission system, operating and expansion, these costs are allocated
among system user in proportion to their extent of use of the transmission resources. Allocation
methodologies differ on their definition and measure of this extent use. They can be classified
as load flow based methods and rolled-in methods such as MW-mile and Postage-Stamp
methodology respectively[4]. The main difference between the Postage-Stamp and MW-Mile
methods is that; the MW-miles uses the calculated values of power flows in its implementation,
while the Postage-Stamp method does not use this calculation.

Methods of rolled type in postage-stamp, this method is of simple implementation. Its

calculation is based on the amplitude of the power transaction. The measure of this amplitude
normally is gotten at the moment where the system reaches maximum power. Being the tariff,
represented by P, the same for all the transaction and R(u) the tax to assign to each transaction
u proportional to P. the expression 2 allows the calculating of R(u)[4].

CT
P=
∑ PG ( g) (1)
g

R ( u )=P ×W (u) (2)

This MW-mile methodology is of straightforward implementation. It considers the

contributions of each transaction of each transaction to the power flows in the lines and the
amount used of network for each transaction. The expression (4) shows how to determine the
tax to be paid for the R(u) transaction[4].

CT
P=
∑ F k × Lk (3)
k

R(u)=∑ P × F k (u)× Lk (4)

k
 CONTENTS

For embedded methods that use to allocate the transmission will face some advantages
and also disadvantages on their own. For advantages is this method apply all the other method
so that they will counter measure the inconvenient of the other methods. For example if MW-
mile method has some problems on its method then the Postage-Stamp has its solution to the
problem. Besides that, this method is simple approach among other method. As professional
engineers’ practices, we need to find simplest way to solve the problem as we appreciate the
value of time. However, this embedded method presents some demerit: it does not consider the
actual state of the system so it because of this does not give true economic information to the
user. Does not induce a load increase in the zones where exists bigger production, neither the
installation of new generators in areas with bigger consumption[5]. For example independent
generators do have not incentives.

Based on safety issues this will cause danger to the generator. As well as this
transactions in which the load and generator are close, what means using lightly the system,
may have subsidize the other transaction other transaction that use more the system. For the
cultural issue, this will be so unfair for the consumers who use less usage because they need
pay as much as the consumers who use more. As the professional engineering practices this
method seems not practicable and had no win-win situation[6]. In fact, this method only
applicable to bilateral transactions where the points of the injection and reception are known.
This method considers that all the negative flows associated to a transaction are beneficial to
the network. Another inconvenience of this method is that it does not have an economic
basis[7]. In other word, it does not transmit adequate economic signals to the users, for example
is the availability of the equipment. This will be unsafe for the user if they misuse the
inapplicable equipment that will cause some chaos in the power system.
 REFERENCES

[1] “A Survey of Transmission Cost Allocation Issues, Methods and Practices” .

[2] “Transmission planning and Cost allocation” .
[3] M. Murali, M. S. Kumari, and M. Sydulu, “A Review of Transmission Pricing Methods in
Restructured Electricity Market and Case Studies,” vol. 5, no. 1, p. 12, 2014.
[4] “D Shirmohammadi, C Rajagopalan, E R Alward, C L Thomas, ‘ COST OF TRANSMISSION
TRANSACTIONS: AN INTRODUCTION’, Transactions on Power Systems, vol. 6, No. 4,
November 1991. - Google Search.” [Online].
[5] Polytechnic Institute of Porto. University of Porto. Portugal, J. Ferreira, Z. Vale, A. Almeida
Vale, and R. Puga, “Cost of Transmission Transactions: Comparison and Discussion of
Used Methods,” Renew. Energy Power Qual. J., vol. 1, no. 01, pp. 403–409, Apr. 2003.
[6] “Impact assessment of occupational safety and health policy: OSHwiki.” [Online]. Available:
https://oshwiki.eu/wiki/Impact_assessment_of_occupational_safety_and_health_policy.
[Accessed: 28-Nov-2019].
[7] M. Z. Meah, A. Mohamed, and S. Serwan, “Comparative analysis of using MW-mile
methods in transmission cost allocation for the Malaysia power system,” in Proceedings.
National Power Engineering Conference, 2003. PECon 2003., Bangi, Malaysia, 2003, pp.
379–382.