Improving the MW-Mile Method Using the Power Factor-Based Approach for Pricing the Transmission Services

The MW-Mile method is an embedded cost pricing method, which is widely used to determine transmission pricing. The method is formulated based on the distance and active power flow in each line of the transmission network. This method may be considered as the first pricing strategy proposed for recovering the fixed transmission cost, based on the actual use of the transmission network. However, this method suffers from the provision of unfair charges to the users, since it ignores the quality of the load in allocating the transmission cost. This paper proposes an improved MW-Mile method by considering not only the changes in MW flows but also the quality of the load, i.e., the power factor. In this study, the IEEE 14-bus system was used to illustrate the contribution of the proposed method in allocating transmission cost to the user in a fair manner.