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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.