Abstract
The paper presents application of marginal cost-based pricing of transmission services which is based on the use of bus incremental cost, in a real network of Philippines, and investigates the relationship between marginal network revenue and the transmission utility's (Transco) revenue requirement. The network income derived from marginal cost pricing fell below Transco's revenue requirement thus necessitating for supplementary charges. The paper proposes an allocation method that allocates supplementary charges based on the user's contribution to incremental flow. This method is applied to allocate the remaining network costs not covered under marginal pricing, and the results are compared with the traditional postage stamp method.
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