Analysis on determining the allocation ratio of transmission service costs using the arbitration game

Abstract

In many parts of the world, the electricity industry is undergoing unprecedented changes. Hence, in order to restructure the electricity industry readily and efficiently and minimize the confusion related to restructuring, it is required the systematic studies on transmission pricing and the allocation of transmission service costs between generators and distributors. However, the allocation ratio of transmission service costs have been determined by regulator arbitrarily under the common practice since there is not any criterion with respect to allocating transmission service costs even now. This paper demonstrates that detemrining the allocation ratio of transmission service costs between generators and distributors is regulator's own authority using game theory. For the analysis, the competition for generators and distributors to determine own allocation ratio is modeled as the arbitration game. © 2003 IFAC.