This paper provides a baste theoretical formulation of a peak-load pricing for transmission access charge. The cost of investment is explicitly taken into account in the objective function, to model the trade-off between network expansion and use of inexpensive generation.

This approach introduces incentives for network expansion at the locations most beneficial to the customers. In a well-defined open access environment, charactering by a single transmission service to all, this approach could become useful for setting transmission reservation right tariffs over various time horizons. Such tariffs are performance-based, in the sense that the transmission paths most useful to the economic transactions receive the highest compensation.