Efficient pricing on distribution network tariffs

Abstract

This paper presents and discusses a methodology for the calculation of efficient prices on distribution network tariffs. Tariffs should reflect costs and assure the absence of cross subsidies between clients.

Distribution pricing: theoretical principles and practical approaches

“…This maintains the relationship between rates for the various consumer categories and tariff periods. In this case, the LTMCs are used as coefficients to recover total costs [16, 17, 23]. Another solution uses additive coefficients, that is, adding the same amount to all rates, thereby maintaining the absolute difference between categories and periods, keeping consumers from shifting consumption from one period to another as a result of the adjustments [22].…”

“…One such criterion, found in several proposals, is to assume that the cost of the closest grid of a given group of consumers (typically, the grid for their voltage level) is recovered by the capacity charge, for grid design is regarded to follow local peak demand. The cost of the more distant grid (higher voltage levels), by contrast, is recovered by an energy‐use charge in the peak period, because this peak is assumed to be responsible for cost in that part of the grid [16, 23]. In [22], it is proposed to recover local distribution grid costs with a fixed charge, and the transmission and high‐voltage distribution grid costs with a capacity charge (or an energy‐use charge, where smart meters are installed).…”

“…Charges are commonly established in terms of the consumption cosine or tangent expressed as a phasor (cosine of phi), although this parameter oversimplifies the reactive power issue, particularly for large accounts. Charges that penalise reactive power consumption in peak periods and its generation during off‐peak periods are often implemented [23].…”

“…Portuguese tariff design methodology is described in [7] and specifically applied to distribution in [23]. Tariffs are based on LTMC in order to avoid cross subsidies among consumers, although what is actually calculated is LTIC.…”

“…Charges that penalise reactive power consumption in peak periods and its generation during off-peak periods are often implemented [23].…”