The Regulatory Policy Institute Research Group

Simplified procedures for network pricing

This paper sets out results from work in progress on the issue of tariff structures for access to, and use of, network facilities. Starting from a simple version of the notional path approach, it is argued that it is relatively straightforward to extend the method so as to incorporate genuine network features into the resulting tariff structures. The resulting approach is called least-cost notional flow analysis. The generalisation leads naturally to a tariff structure based on entry and exit charges. It also offers a framework in which conflicting objectives – such as cost reflectivitiy, cost recovery, spatial averaging of prices, ease of monitoring, etc. — can be traded-off in a relatively transparent way.

The contents of this paper were preliminary when published. Please do not quote without permission of the author.

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