method of determining marginal T&D costs at several different
voltage levels would be to use historical data to fit regression
equations such as:
(Transmission Costs) = a + b - (Peak Demand).
However there is no guarantee that such past relationships
would hold true in the future, as the system expands.
Assume that the AIC of EHV and HV transmission has been
computed and annuitized over the lifetime of the plant (e.g.,
30 years) to yield the marginal costs ALRMCHV. Then, the
total LRMC of capacity during the peak period, at the HV
level would be:
where LHV% is the percentage of incoming peak power that is
lost in EHV and HV network. This procedure may be repeated
at the MV and LV levels. The LRMC of T&D calculated
in this way is based on actual growth of future demand,
and averaged over many consumers. However, facilities associated
with given generating sites or loads should be specifically
allocated to these uses rather than averaged out, e.g.,
transmission spur line, exceptionally low or high distribution
costs for one or moreg iven customers.
C. Marginal Energy Costs and Treatment of Losses
The system lamda concept is useful ,in calculating marginal
energy costs. The LRMC of peak period energy will be the
running costs of the machines to be used last in the merit
order, to meet the incremental peak kilowatt-hour represented
by AD. In our model, this would be the fuel and operating
costs of gas turbines, adjusted by the appropriate peak loss
factors at each voltage level. Similarly, the LRMC of off-peak
energy would usually be the running costs of the least efficient
base load or cycling plant used during this period. Exceptions
occur when the marginal plant used during a rating period was
not necessarily the least efficient machine that could have
ELECTRICITY PRICING 339
been used. For example, less efficient plants which have long
start-up times and are required in the next rating period, may
be operated earlier in the loading order than more efficient
plant. This would correspond to minimization of operating
costs over several rating periods rather than on an hourly basis.
Again since the heat rate of the plants could vary with output
level, the simple linear relationship usually assumed between
generation costs and kilowatt-hours may need to be replaced
by a more realistic nonlinear model [361. We note that the
loss factors for adjusting off-peak costs will be smaller than the