A cost-causal marginal participation method using min-max fairness for transmission services cost allocation

We consider the problem of fair allocation of the cost of a transmission system among load and generation entities using the marginal participation approach. We show that a cost-causal approach involving capacity-based line cost rate and a min-max fair economic slack bus selection for price-taking entities leads to a rigorously fair and more accurate implementation of marginal participation method. In the existing methods the counter-flows are masked, which is a compromise with fairness and linearity. However, if the counter-flows are incentivized then it can lead to pay-offs to some entities. The proposed approach solves the problem of pay-offs without masking the counter-flows. This is achieved by separation of the total transmission services cost into usage, reliability and residual capacity components. The allocation of the first two components is based on the min-max fairness policy, and the residual capacity costs are allocated on a pro-rata basis. Simulation results on multiple IEEE test systems, Indian utility power systems and extensive comparative evaluations for the contemporary methods demonstrate the claims made.