Additive tariffs in the electricity sector

This paper presents and discusses a methodology for the calculation and application of tariffs in the electricity sector based on the principle of tariff additivity. This principle imposes that the prices of the several regulated tariffs, for instance the access tariffs paid by all customers for the use of the networks, are obtained by the summation of the several regulated activity tariffs related with the components or services used by each customer along the value chain of the electricity sector. It is shown how such tariffs can reflect costs and assure the absence of cross subsidies between clients. The methodology presented was adopted in the Portuguese Tariff Code for electricity by the Portuguese Energy Regulator (ERSE), being applied since 2002. The work presented in this article reflects the experience acquired by ERSE during the preparation, discussion and implementation of this additive tariff system