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Loss Modeling in T&D Systems: Is $25 Billion Worth Losing?

Energy players can lose a lot more than their shirt if they fail to model transmission losses properly.
Fortnightly Magazine - August 2002

forecasts the ERCOT-wide transmission loss factors, expressed as a percentage of load for each settlement interval of the operating day. Distribution loss factors by settlement interval are determined by each Distribution Service Provider (DSP), which in turn submits them to ERCOT. The settlement process uses the forecast loss factors and deemed actual loss factors when adjusting aggregated load for losses to determine total QSE load obligations. Seasonal transmission loss factors are derived from annually updated ERCOT on-peak and off-peak load flow base case analysis conducted by ERCOT. The ERCOT ISO makes the transmission loss factors available on their Web site (

ISO New England

Losses on the NEPOOL transmission system, especially the Pool Transmission Facilities (PTF), are determined for each market participant's and non-participant's generation obligations for each hour. The obligations are adjusted automatically for their share of losses (net losses after through losses and out losses have been deducted). The responsibility for losses is included as an adjustment in the settlement obligations via additions to the generation or load obligation.

New York ISO

NYISO addresses transmission losses by computing the marginal (or incremental) effect of real power transmission losses for the day-ahead market (aka BME), and real-time operations. Balance Market Evaluation refers to a process that NYISO runs on an hourly basis to tune their unit schedules. There is no market for this like there is for day-ahead and real-time, but the ISO does consider losses with regard to all three. NYISO calculates a penalty factor, which is defined as the increase in generator output at a certain network bus that is required to supply an increase in load, taking into account network transmission losses. Generator energy bids are multiplied by penalty factors to account for incremental transmission losses in the dispatch process. NYISO also uses marginal loss calculation algorithms to compute losses associated with external transactions flowing through the New York Control Area. The locational marginal pricing (LMP) algorithm identifies the energy cost, loss cost, and congestion cost components separately.


Point-to-point customer losses are financially quantified and charged at the hourly PJM load-weighted-average LMP based on average loss factors of three percent for on-peak and 2.5 percent for off-peak periods. The loss revenues from point-to-point customers are allocated as credits to network customers based on hourly load ratio shares. Network customers, on the other hand, have their losses implicitly included in their load quantities except for 500kV losses, which are metered and allocated to fully-metered electric distribution companies based on hourly load ratio shares.

WECC Region (formerly WSCC)

Presently within WECC, the most common practice is to require energy payback as a means of dealing with losses. Energy payback is a scheme in which the counterparty does not explicitly pay for transmission losses during the bilateral transaction or during the scheduling hour, but wheels back the amount of MW dissipated in losses within a pre-determined length of time or during an off-peak period. If the payback is within one week, it is referred to as the "168-hour energy payback scheme." For some control areas, energy payback is