Transport Pricing in the Electricity Industry

Efficiency in the management of electricity transmission networksis essential for the success of the liberalized energy markets.The paper is dedicated to the short-run management problemsof these natural monopolies. It analyses how to organize andprice access to and use of the transport network. After presentingthe technical and institutional features of the electricityindustry, the paper develops the normative approach of first-bestand second-best pricing by means of nodal prices. Then the exerciseof market power at some nodes and its consequences for the transportsystem operator are examined. The remaining part is more policyoriented, describing and analysing the practical solutions implementedin the European Union for energy transport pricing. The paperconcludes with some remarks about the enforcement of antitrustrules in electricity transport.