This study proposes a full-cost electricity pricing model (M3) based on power flow tracing, addressing limitations in traditional nodal pricing and postage stamp methods. M3 dynamically allocates fixed transmission costs based on actual grid utilization, improving fairness, price signal accuracy, and congestion management. The model achieves fast convergence within 20 iterations across tested networks. Sensitivity analysis confirms that fuel costs and load variations significantly impact pricing, making M3 more adaptive and responsive. A regression-based forecasting model further enhances price predictability. The dual IEEE 118-bus case study validates M3’s feasibility in inter-provincial electricity markets, demonstrating its effectiveness for real-time pricing and investment planning.

To address the issues of the current nodal pricing mechanism, which does not incorporate fixed transmission costs and leads to unfair transmission cost allocation, this paper proposes a full-cost electricity pricing model based on power flow tracing technology. By defining full-cost electricity pricing and integrating generation marginal costs with effective transmission costs, the proposed model adheres to the principle of "costs borne by beneficiaries." The effectiveness of the proposed model is validated through case studies on IEEE 30-bus and IEEE 118-bus systems. The results demonstrate that the proposed method can optimize power grid resource allocation and enhance investment efficiency while considering power grid congestion.