Prospective Reconciliation of Transmission Loss Cost in Alberta

One of the challenges in Alberta's deregulated electricity market is to recover transmission loss costs in a fair and equitable manner. The independent system operator (ISO), the Alberta Electric System Operator or AESO in Alberta, Canada, has introduced a new prospective methodology to reconcile the transmission loss revenue to loss cost on an annual basis since January 1, 2006. In the reconciliation process, a quarterly calibration factor (CF) is calculated to true up the difference between loss revenue and loss cost. The CF is defined as the percentage of the combined actual and forecasted difference in loss revenue and loss cost divided by the loss factor customer volumes and pool price. The focus behind this chosen methodology is to have a small CF in each quarter, a stable reconciliation pattern, and a small year-end difference. The new methodology has met these three goals in Alberta's deregulated electricity market.