Marginal pricing of transmission services. An analysis of cost recovery

The authors present an in-depth analysis of network revenues that are computed with marginal pricing, and investigate the reasons why marginal prices in actual power systems fail to recover total incurred network costs. The major causes of the failure are identified and illustrated with numerical examples. The paper analyzes the regulatory implications of marginal network pricing in the context of competitive electricity markets and provides suggestions for the meaningful allocation of network costs among users. 5 figs., 9 tabs., 8 refs