Use of power flow based embedded methods to set tariffs for use of networks-a case study using the Portuguese transmission company

In the scope of a consultancy study conducted by the Power Systems Unit of INESC Porto, the yearly regulated remuneration of the Portuguese transmission provider was allocated to the network users considering an approach based on power-flow embedded methods. The tested cost allocation methods were the MW mile, the modulus and the zero counterflow. The application of that approach lead to geographically discriminated tariffs for use of transmission networks. This study must be considered as a contribution to the revision process of the current regulations when the first regulatory period is about to end. It should be emphasized that it was not the purpose of this study to question the current Cost of service/rate of return strategy in force in the Portuguese transmission sector and to calculate the adequate yearly remuneration of the transmission provider. The only objective of this study was to simulate the application of alternative cost allocation approaches, given that the whole amount to allocate is fixed by current rules. In this way, the authors think it is possible to contribute to a more technically sounded discussion about the advantages and drawbacks of several approaches