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TAR NC Implementation Document – Second Edition September 2017
How to perform cost allocation assessments
Capacity assessment:
compares the transmission system revenue to be collected from capacity charges
for intra-system and cross-system network uses (
and
),
taking into account cost drivers (
and
). The capacity assess-
ment compares the intra-system capacity ratio (
) to the cross-system
capacity ratio (
).
The ratio comparison involves a ‘capacity cost allocation comparison index’
(
) calculated as follows:
Commodity assessment:
the commodity assessment compares transmission services revenue collected from
commodity charges for intra-system and cross-system network use (
and
), taking into account cost drivers (
and
).
The commodity assessment compares the intra-system commodity ratio (
)
to the cross-system commodity ratio (
).
The ratio comparison involves the ‘commodity cost allocation comparison index’(
) calculated as follows:
For both assessments, the intent is to guarantee against undue cross-subsidies on
capacity or commodity by checking that the revenue-to-cost ratio for intra-system
use is broadly similar to the revenue-to-cost ratio for cross-system use. Any ratio
above 10% requires a justification by the NRA in its decision under Article 27(4)
following consultation under Article 26. Annex C provides an example showing how
to perform the CAA.