Transport pricing in the electricity industry

Efficiency in the management of electricity transmission networks is essent ial for the success of the liberalized energy markets. The paper is dedicat ed to the short-run management problems of these natural monopolies. It ana lyses how to organize and price access to and use of the transport network. After presenting the technical and institutional features of the electrici ty industry, the paper develops the normative approach of first-best and se cond-best pricing by means of nodal prices. Then the exercise of market pow er at some nodes and its consequences for the transport system operator are examined. The remaining part is more policy oriented, describing and analy sing the practical solutions implemented in the European Union for energy t ransport pricing. The paper concludes with some remarks about the enforceme nt of antitrust rules in electricity transport.