55 / 272
TAR NC Implementation Document – Second Edition September 2017 |
55
Introduction
LINK BETWEEN REVENUE, ALLOCATION
OF COSTS, REVENUE RECOVERY
Responsibility: RPM determination is subject to consultation per Article 26(1)
by TSO/NRA, as NRA decides; subject to decision by NRA
The choice of RPM is a key decision for a TSO or NRA, and is a central topic of the
TAR NC. The RPM determines how to allocate the TSO’s costs among entry and exit
points, how the TSO recovers its revenue, and how to charge network users.
The TAR NC contemplates an initial NRA decision on a RPM, and a required
consultation at least every five years thereafter. As explained above, the collection of
transmission services revenue must be based primarily on capacity charges in
accordance with Article 4(3).
Figure 12 shows how the RPM fits within a series of several required analytical steps,
which together lead to the determination of a TSO’s revenue recovery.
\\
The TAR NC does not restrict the choice of RPM, since a TSO/NRA can consid-
er any methodology as long as the assessment involves a comparison to the
CWD counterfactual in the final consultation document. The TAR NC does not
in fact detail any possible RPM except for the CWD counterfactual.
\\
Only the requirements of Article 7 limit the free selection of parameters and
assumptions for the RPM.
Figure 12:
Link between revenue reconciliation, cost allocation, reference price
determination and revenue recovery
Allowed/Target Revenue Setting
\\
Per regulatory regime, NRAs set an allowed/
target revenue stream which gives a TSO a set
of allowed/target revenues to be earned over
a defined period of time
Reference Price Determination
\\
Once the transmission services revenue has
been allocated, cost drivers are considered to
calculate the reference prices
\\
The reference prices are used as the basis for
setting all capacity-based transmission tariffs
Revenue Recovery
\\
Collection of the revenues by the TSOs via the
application of the approved entry and exit
tariffs
\\
Determination of potential revenue gaps that
need to be reconciled in the following year(s)
Cost Allocation
\\
The transmission services revenue is allocat-
ed to individual entry and exit points or
clusters of entry or exit points via reference
price methodologies, which may also include
adjustments