Incremental Distribution Network Pricing Mechanism in China Based on LASSO Regression and Synthetic User Allocation Factor

Incremental distribution network (IDN) is unique in China. It is a newly sprouted transition product in electric power system reform period. As IDN is huge in number and lacks in regulation, the pricing is a difficult problem needed to be solved. Chinese government has issued a regulation to set IDN price, however, which is widely considered unreasonable. This paper proposes a new IDN pricing mechanism based on allowed revenue method, and LASSO regression is applied to determine synthetic user allocation factor (SUAF), which is used to allocate the allowed revenue fairly and reasonably between different types of users. The study concludes that: IDN pricing mechanism proposed in this paper is consistent with pricing principle, and the pricing result is objective and reasonable which can be popularized and applied to all IDNs in China.