Preliminary Studies On The Transmission Pricing Solutions In The Northeast Electricity Market

The 16th Central Committee of the C.P.C. set forth new development goal for overall construction of the well-to-do society, and acceleration of socialist modernization. To meet requirements for development of socialist market economy and effective implementation of sustainable development strategy of power industry, we must deepen the reform of power system, foster regional power market, break through monopoly, introduce competition mechanism and realize optimized configuration of power resources within local area or even the whole country. We should establish several regional power markets in consistency with our national conditions, and to provide reasonable power transmission price schedule fitting for economic development of our country is the key concern for improvement of regional power network benefit, and optimization of resources configuration. Presently, internationally available power transmission pricing methods can be divided into two major kinds, i.e. the marginal cost method based on microeconomics and comprehensive cost method based on accounting. 1. Marginal cost method Marginal cost method mainly refers to the long-term marginal cost method and short-term marginal cost method. For long-term marginal cost method, the power transmission price consists of two parts, i.e. the long-term marginal capacity cost (mainly used for recovery of investment into power transmission line) and the long-term marginal operation cost (mainly used for recovery of operation cost). For short-term marginal cost method, the power transmission price consists of two parts, i.e. marginal operation cost and balancing harmonization cost, which are normally obtained through the OPF method. According to theory of economics, to determine power transmission price with short-term marginal cost method can maximize social benefit, and provide correct economic signal to the users. 2. Comprehensive cost method The substantial meaning of comprehensive cost method: Firstly, construction cost and annual operation cost of power transmission system to be recovered per year should be calculated so as to obtain total power transmission cost per year. Then, the cost should be distributed among each deal of power transmission according to some rules. The power transmission price is the sum of average capacity cost and average operation cost. Key concern with adoption of this method is how to distribute the total cost. According to different distribution methods, multiple power transmission pricing methods are formed, e.g. stamp method, contract path method, megawatt-km. method, and line-by-line calculation method (based on stream tracing megawatt-km method), etc. All of these methods are practical for use. The comprehensive cost method is easy to realize, which is rather practical and easy to be accepted by market participants. Therefore, most of the existing power markets in operation now adopt this method. Electric power is a special commodity. According to fundamentals of economics, the price of a commodity will be decided by its production cost. So will the power transmission price. To set reasonable price of power transmission, we must carry out correct cost calculation, and then, reasonable share the cost. Power transmission cost refers to the sum of three services cost, i.e. management, transmission and auxiliary service. That is to say, the transmission service is insufficient for completion of power transmission service, and it should further include three levels: management service, transmission service and auxiliary service. None of them should be omitted. The transmission service refers to the power transmission service in general concept, i.e. main service. So, the power transmission cost refers to all power transmission service costs mentioned above. Under the conditions of the regional power market, to deal with power will need a series of power transmission service, i.e., cost of various kinds of power transmission services must be quantitatively calculated, which will be used as basis for settlement of the power transaction. Usually, when analyzing power transmission service, we should proceed from the three aspects of service definition, service identification and cost calculation. Power transmission cost refers to the cost spent by the power transmission network that undertakes the power transmission business for provision of power transmission service. Cost analysis can be divided into two aspects of operation cost and capacity cost. The former includes the network damage cost occurred during the process of power transmission and cost for rescheduling power generating plan and economic dispatch, while the latter covers return of investmentinto the power transmission and distribution equipment, depreciation of power transmission and distribution equipment, operation and maintenance cost, administration fee and tax, etc. The northeast power network is the earliest trans-provincial power network in our country, which carries out centralized planning, centralized dispatch, centralized accounting and centralized management for a long time. Now it has formed rather perfect trans-provincial network; The comprehensive power selling price level in three northeast provinces is similar, which is favorable for establishment of the new power price mechanism; the demonstration of "Separating plant from the network, and networking the best competitive price"was carried out in the three northeast provinces in 1999, which has accumulated some practical experience for construction of the power market in the northeast area; Now, the power supply environment in the northeast area is favorable, and the opportunity becomes mature for introduction of the competition mechanism and establishment of the regional power market. To select reasonable power transmission pricing mode and power transmission pricing method is the key factor and prerequisite for scientific and reasonable pricing of the power market in the northeast area. Now, there are three power transmission pricing modes available, i.e. the single capacity power price, single quantity power price, and two systems power price. The common power transmission pricing methods include stamp method, contract path method, marginal stream method, megawatt-km. method based on stream, long run marginal cost method and short run marginal cost method, etc. In the northeast power network, the 500kV power network of Jilin Province is located in the middle part of the whole northeast main grid, which shoulders the main mission to send the power from the north to the south of the entire northeast power network. To take the 500kV power network of Jilin Province as the target of calculation and analysis will have the typical significance. Through three methods of the single capacity power price, single quantity power price, and two systems power price, a case study with calculation has been carried out on the 500kV power network of Jilin Province, which concludes the advantages and disadvantages of different power transmission pricing methods and problems to be solved.