Allocation of expansion transmission costs: areas of influence method versus economical benefit method

The open access to the transmission network and the methods to allocate its costs are the key point that allows free competition in deregulated electric markets. All existing allocation methodologies have advantages and disadvantages that depend on their own features, the power system characteristics, and the price structure of the market. The comparison of network cost allocation methods has been the aim of many studies in order to improve them. In this paper, the analytical relation between areas of influence method and a method based on the economical benefit for allocation of transmission costs is presented. Common points of both methodologies are discussed as well as their advantages to be applied to pay transmission network expansions. It is concluded that both methodologies are equivalent only under certain conditions.