Article 5Cost allocation assessments1.

The national regulatory authority or the transmission system operator, as decided by the national regulatory authority, shall perform the following assessments and shall publish them as part of the final consultation referred to in Article 26:

(a)

a cost allocation assessment relating to the transmission services revenue to be recovered by capacity-based transmission tariffs and based exclusively on the cost drivers of

(i)

technical capacity; or

(ii)

forecasted contracted capacity; or

(iii)

technical capacity and distance; or

(iv)

forecasted contracted capacity and distance;

(b)

a cost allocation assessment relating to the transmission services revenue to be recovered by commodity-based transmission tariffs, if any, and based exclusively on the cost drivers of:

(i)

the amount of gas flows; or

(ii)

the amount of gas flows and distance.

The cost allocation assessments shall indicate the degree of cross-subsidisation between intra-system and cross-system network use based on the proposed reference price methodology.

The cost allocation assessment referred to in paragraph 1(a) shall be carried out as follows:

(a)

the transmission services capacity revenue to be obtained from intra-system network use at both all entry points and all exit points shall be divided by the value of the relevant capacity cost driver(s) for intra-system network use in order to calculate the intra-system capacity ratio, which is defined as a monetary unit per measurement unit, such as in pounds sterling per MWh/day, in accordance with the following formula:

{Ratio}_{intra}^{cap} = \frac{{Revenue}_{intra}^{cap}}{{Driver}_{intra}^{cap}}

Where:

${Revenue}_{intra}^{cap}$ is the revenue, defined in a monetary unit such as pounds sterling, which is obtained from capacity tariffs and charged for intra-system network use;

${Driver}_{intra}^{cap}$ is the value of capacity-related cost driver(s) for intra-system network use, such as the sum of the average daily forecasted capacities contracted at each intra-system entry point and intra-system exit point, or cluster of points, and is defined in a measurement unit such as MWh/day.

(b)

the transmission services capacity revenue to be obtained from cross-system network use at both all entry points and all exit points shall be divided by the value of the relevant capacity cost driver(s) for cross-system network use in order to calculate the cross-system capacity ratio, which is defined as a monetary unit per measurement unit, such as in pounds sterling per MWh/day, in accordance with the following formula:

{Ratio}_{cross}^{cap} = \frac{{Revenue}_{cross}^{cap}}{{Driver}_{cross}^{cap}}

Where:

${Revenue}_{cross}^{cap}$ is the revenue, defined in a monetary unit such as pounds sterling, which is obtained from capacity tariffs and charged for cross-system network use;

${Driver}_{cross}^{cap}$ is the value of capacity-related cost driver(s) for cross-system network use, such as the sum of the average daily forecasted capacities contracted at each cross-system entry and exit point, or cluster of points, and is defined in a measurement unit such as MWh/day.

(c)

the capacity cost allocation comparison index between the ratios referred to in points (a) and (b), which is defined in percentage, shall be calculated in accordance with the following formula:

{Comp}_{cap} = \frac{2 \times |{Ratio}_{intra}^{cap} - {Ratio}_{cross}^{cap}|}{{Ratio}_{intra}^{cap} + {Ratio}_{cross}^{cap}} \times 100 %

The cost allocation assessment referred to in paragraph 1(b) shall be carried out as follows:

(a)

the transmission services commodity revenue to be obtained from intra-system network use at both all entry points and all exit points shall be divided by the value of the relevant commodity cost driver(s) for intra-system network use in order to calculate the intra-system commodity ratio, which is defined as a monetary unit per measurement unit, such as in pounds sterling per MWh, in accordance with the following formula:

{Ratio}_{intra}^{comm} = \frac{{Revenue}_{intra}^{comm}}{{Driver}_{intra}^{comm}}

Where:

${Revenue}_{intra}^{comm}$ is the revenue, defined in a monetary unit such as pounds sterling, which is obtained from commodity tariffs and charged for intra-system network use;

${Driver}_{intra}^{comm}$ is the value of commodity-related cost driver(s) for intra-system network use, such as the sum of the average daily forecasted flows at each intra-system entry and exit point, or cluster of points, and is defined in a measurement unit such as MWh.

(b)

the transmission services commodity revenue to be obtained from cross-system network use at both all entry points and all exit points shall be divided by the value of the relevant commodity cost driver(s) for cross-system network use in order to calculate the cross-system commodity ratio, which is defined as a monetary unit per measurement unit, such as in pounds sterling per MWh, in accordance with the following formula:

{Ratio}_{cross}^{comm} = \frac{{Revenue}_{cross}^{comm}}{{Driver}_{cross}^{comm}}

Where:

${Revenue}_{cross}^{comm}$ is the revenue, defined in a monetary unit such as pounds sterling, which is obtained from commodity tariffs and charged on cross-system network use;

${Driver}_{cross}^{comm}$ is the value of commodity-related cost driver(s) for cross-system network use, such as the sum of the average daily forecasted flows at each cross-system entry and exit point, or cluster of points, and is defined in a measurement unit such as MWh.

(c)

the commodity cost allocation comparison index between the ratios referred to in points (a) and (b), which is defined in percentage, shall be calculated in accordance with the following formula:

{Comp}_{comm} = \frac{2 \times |{Ratio}_{intra}^{comm} - {Ratio}_{cross}^{comm}|}{{Ratio}_{intra}^{comm} + {Ratio}_{cross}^{comm}} \times 100 %

The transmission services revenue to be obtained from intra-system network use at entry points referred to in paragraphs 3(a) and 4(a) shall be calculated as follows:

(a)

the amount of allocated capacity or, respectively, flows attributed to the provision of transmission services for cross-system network use at all entry points shall be deemed equal to the amount of capacity or, respectively, flows attributed to the provision of transmission services for cross-system network use at all exit points;

(b)

the capacity and, respectively, flows, determined as set out in point (a) of this paragraph shall be used to calculate the transmission services revenue to be obtained from cross-system network use at entry points;

(c)

the difference between the overall transmission services revenue to be obtained at entry points and the resulting value referred to in point (b) of this paragraph shall be equal to the transmission services revenue to be obtained from intra-system network use at entry points.

Where distance is used as a cost driver in combination with technical or forecasted contracted capacity or flows, the capacity weighted average distance or, respectively, commodity weighted average distance shall be used. Where the results of the capacity, or respectively commodity cost allocation comparison indexes referred to in paragraph 3(c) or, respectively paragraph 4(c), exceed 10 percent, the national regulatory authority shall provide the justification for such results in the decision referred to in Article 27(4).