Improved Marginal Loss Calculations During Hours of Transmission Congestion

Shortcomings of the current policy focus and accepted implementations for calculating and settling transmission losses strictly as marginal losses are presented. One modified marginal loss calculation approach for hours of transmission congestion is proposed and demonstrated using a 5-bus model from the PJM system. The objective of the suggested change in the use and determination of marginal losses is both to improve market transparency through an increased understanding of marginal loss calculations, and to improve the accuracy of the marginal loss calculation during hours with binding transmission constraints. Along with an ability to hedge risks associated with losses, these changes will lead to better defined market rules and property rights in electricity markets.