STEM help / Calculation framework

10.3.4 Cost Allocation

The costs of Resources are summed to provide the results for each Function and for the network as a whole. If there is only one Service, then its results are the same as for the Network. Otherwise, Resource costs are allocated to Services in order to produce individual Service results.

When there is only one Service using a particular Resource, the cost allocation is quite straightforward: all the costs are allocated to that Service. More generally, the costs are allocated in proportion to the capacity used by each Service.

This allocation applies to Depreciation, Amortisation and all Operating Costs. Capital Expenditure is also allocated between the Services using a Resource in the year when the expenditure arises. However, the allocated Depreciation and Amortisation provides a fairer picture of the effective cost of a Service, since it is billed over the whole Financial Lifetime of a Resource, rather than just the year of installation.

 

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