Transmission cost allocation by using MW-Mile approaches in a restructured Indian power system

Transmission access pricing is a key issue of restructuring and deregulation. Transmission pricing must be non-discriminatory, transparent, economically efficient, and allow full recovery of costs. In the case of electricity transmission system, economic efficiency implies promoting an optimal utilization of existing network, efficient siting of new generations and loads and promoting transmission investments. These characteristics require that the transmission circuits that pertain to each transaction must be identified and their costs properly allocated among users. Therefore cost allocation is a major issue in transmission access pricing and has given rise to a lot of methodologies. This paper presents an overview of MW-Mile method of transmission cost allocation. Under MW-Mile method there are a number of variants i.e. absolute, dominant and reverse in relation to how the cost of each circuit is allocated to the various users of the circuit. In India, with the enactment of Electricity Act, 2003 lay down the guide lines towards the transmission tariff sensitive to distance, direction and quantum of power flow.