Chapter 4: Who pays for the network when trade is international?
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In the fourth chapter of this book, we describe how network investments are recovered when trade is international. We answer four questions. First, who pays for the electricity network? Commonly, network users pay for the network through national network tariffs. Second, why did national network tariffs start to be harmonized? National network tariffs needed to avoid distorting the level playing field in the European electricity market. Third, why was there a move away from transit charges? We discuss the inter-TSO compensation (ITC) mechanism, which replaced the transit charges that were initially applied to cross-border transactions. And fourth, how to share network investment costs between countries? The Trans European Energy Networks Regulation (TEN-E) introduced a process for so-called cross-border cost allocation decisions (CBCA). The chapter ends with a conclusion, in which we summarize our main points.