Peak-load pricing for electric power transmission

This paper provides a basic theoretical formulation of peak-load pricing for a transmission access charge. The cost of investment is explicitly taken into account in the objective function, to model the trade-off between network expansion and the use of inexpensive generation. This approach introduces incentives for network expansion at the locations most beneficial to the customers. In a well-defined open access environment, characterized by a single transmission service to all, this approach could become useful for setting transmission reservation right tariffs over various time horizons. Such tariffs are performance-based, in the sense that the transmission paths most useful to the economic transactions receive the highest compensation.