peak period loss factors when current flows are greatest [6].
The treatment of losses raises several important issues. While
total normal technical losses (including station use) vary from
system to system, if these are significantly greater than about
15 percent of gross generation, then loss reduction should have
a high priority. When engineering losses in excess of acceptable
levels are routinely passed onto the customer, this may
act as a disincentive to improvements in technical or administrative
efficiency. Losses due to theft and unpaid bills are also
often loaded onto paying customers. Here again, the issue is
whether these nontechnical losses could be reduced by appropriate
measures, or if incremental consumption always has an
unavoidable component of such losses associated with it.
Theft in U.S. systems has been estimated to average about
2 percent of gross generation, but norms in developing countries
may have to be set somewhat higher [ lo], [ 3 11. The
LRMC analysis at the generation, transmission and distribution
levels helps to establish whether these incremental costs
are excessive because of overinvestment, high losses, or both.
D. Consumer Costs
It has proved difficult to allocate part of the distribution system
investment costs to customer costs, on the basis of a
skeleton system required to serve a hypothetical minimum
load. Similarly regression analysis of past data to fit equations
such as:
(Distribution Costs) = a + b (Peak Demand)
+ c - (Number of Customers)
has not been too successful because peak demand and the
number of customers are usually highly correlated. Therefore,
general distribution network costs may be considered as capacity
costs, while customer costs are defined as those which
can be readily allocated to users. Initial customer costs consist
of nonrecurrent expenses attributable to items such as
service drop lines, meters and labor for installation. These
costs may be charged to the customer as a lump sum or distributed
payments over several years.
Recurrent customer costs that occur due to meter reading,
billing, administrative and other expenses, could be imposed as
a recurring flat charge, in addition to kilowatt and kilowatthour
charges. In general, the allocation of incremental (nonfuel)
operation, maintenance and administrative costs among
the categories: capacity, energy and customer costs, varies
from system to system and requires specific analysis. However,