ENTSOG Tariff NC - Implementation Document 2nd Edition

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.

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TAR NC Implementation Document – Second Edition September 2017