Assessment of Long-Run Marginal Costing of Transmission and Distribution Expansion
The Long-Run Marginal Costing (LRMC) technique is used as a cost-reflecting pricing method and finds useful application in the recovery of the total investment cost for the use of a transmission or distribution network. This paper reviews recent applications of this technique based on some examples from United Kingdom, Greece and Oman. Then using typical practical networks as case studies, this paper compares two different methods for the determination of the LRMC of transmission and distribution expansion/reinforcement: the average incremental cost (AIC) methodology and marginal incremental costs (MIC) techniques. Based on the results obtained, it is concluded that the AIC technique is easier to implement and explain because of its price stability.