Wheeling charge under a deregulated environment

Today's electric power industry is undergoing many fundamental changes due to the process of deregulation. Traditionally, electric power systems in many countries were structured in a single vertically integrated company for providing electric power to their customers based on cost-of-service. However, a number of countries have implemented or are implementing a free market deregulated industry in recent years. It is strongly believed that deregulation will have profound and important implications on technology within the electric power industry and the operation of industrial systems. Therefore, industrial sectors need to re-evaluate potential impacts and strategies of operation under a deregulated environment. One of the most exciting opportunities for the customer is the implementation of wholesale and retail wheeling. With this change, customers will have the option to purchase services and energy from different sources. However, before exercise this right, one has to understand the possible costs and risks associate with this right. From the economic point of view, lower energy cost does not necessarily mean lower utility cost. The cost of wheeling charges and other factors have to be figured into the calculation. Since it is impossible to color the electron, there is no standard formula to calculate wheeling charges within the utility industry. This paper discusses several commonly used wheeling calculation methods used by utility companies. A numerical example is provided to illustrate the Vector Absolute Mega-Watt Mile (VAMM) method that is used by the Electric Reliability Council of Texas (ERCOT).