In this paper, the authors describe the basic technical concepts involved in developing cost based transmission prices. They introduce the concepts of transmission pricing paradigms and methodologies to better illustrate how transmission costs are transformed into transmission prices. They also briefly discuss the role of these paradigms and methodologies in promoting "economic efficiency" which is narrowly defined in this paper. They conclude the paper with an example of the application of some of these paradigms and methodologies for pricing transmission services in Brazil.
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Shirmohammadi et al. (1996) studied this question.
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