# Who pays for electric grid expansion?

Not a free choice: cost allocation is written in law and order. The US uses beneficiary pays; Brazil bills TUST×MUST; the EU uses CBCA.

Author: NiLu
Locale: en
Published: 2026-08-28
Updated: 2026-08-28
Canonical: https://blog.nilu.pro/en/blog/who-pays-for-grid-expansion/
Markdown: https://blog.nilu.pro/en/blog/who-pays-for-grid-expansion.md
JSON: https://blog.nilu.pro/en/blog/who-pays-for-grid-expansion.json

## In brief

- Who pays for reinforcement or grid use is a package of methods, roles, and terms written in law, order, or auction notice.
- In the US, Order 1000 requires beneficiary pays “roughly commensurate”; Order 1920 asks for 20-year planning with an ex-ante method.
- In Brazil, the auction pays the lowest RAP (30 years) and use is billed as EUST = TUST × MUST.
- In the EU, charges must be cost-reflective; cross-border costs are split via CBCA, with ACER as last instance.

## Contents

- [Not the operator’s free choice](#not-a-free-choice)
- [Three families of mechanism](#three-families)
- [How each bloc bills](#how-each-bloc-bills)
- [The language of tariff protection](#tariff-protection)
- [Uncertainties](#uncertainties)

<a id="not-a-free-choice"></a>

## Not the operator’s free choice

Who pays for electric-grid expansion is not a free decision by each utility. It is a package of cost-allocation methods, institutional roles, and concession contracts written in order, statute, decree, or auction notice. The useful question is not “who should pay?”, but “which method is documented in this jurisdiction — and for which kind of reinforcement?”. [[1]](#ref-1)

<a id="three-families"></a>

## Three families of mechanism

The first family is regional socialization through a use-of-system charge. In the US, FERC Order No. 1000 requires a regional method defined ex ante; Principle 1 allocates costs to those who benefit “in a manner that is at least roughly commensurate with estimated benefits”. [[1]](#ref-1) Order 1920 (May 13, 2024) requires long-term planning — a minimum 20-year horizon — and an ex-ante method in the tariff; a state agreement is allowed but cannot be the only method. [[7]](#ref-7)

The second is participant funding: the connecting party pays the reinforcement the study assigns to its project. Order 2023 allocates cluster costs by proportional impact — a generation-centered design; large loads remain in a separate discussion. [[6]](#ref-6)

The third combines both poles with extra consumer protection — the vocabulary changes by jurisdiction, the problem does not.

<a id="how-each-bloc-bills"></a>

## How each bloc bills

In Brazil, the transmission auction pays the winner the lowest Allowed Annual Revenue (RAP) — 30 years in Auction Notice No. 4/2025, reviewed every 5 years. Use is billed later: EUST = approved TUST × MUST, regardless of actual monthly use. [[2]](#ref-2) [[3]](#ref-3) ANEEL regulates, ONS operates the SIN, and MME decides whether to extend distribution concessions. [[11]](#ref-11) [[12]](#ref-12) [[13]](#ref-13)

In the European Union, Article 18 of Regulation (EU) 2019/943 requires cost-reflective, transparent, non-discriminatory charges. Across countries, CBCA under Regulation (EU) 2022/869 splits costs of projects of common interest; if national regulators do not agree within 6 months, ACER decides. [[4]](#ref-4) [[5]](#ref-5)

<a id="tariff-protection"></a>

## The language of tariff protection

- US: “just and reasonable” rates (Federal Power Act §205) and beneficiary pays. [[9]](#ref-9) [[1]](#ref-1)
- Brazil: “modicidade tarifária” as a condition for concession extension. [[16]](#ref-16) [[13]](#ref-13)
- EU: cost-reflective charges and ACER’s “disproportionate burden for consumers” test. [[4]](#ref-4) [[17]](#ref-17)

These are textual standards in the rules themselves — not a ranking of which design is better.

<a id="uncertainties"></a>

## Uncertainties

The dossier sources do not detail the actual formulas in US regional OATTs after compliance with Orders 1000 and 1920. It is also unclear how large-load cost allocation in the US will settle beyond Order 2023’s generation design.

<a id="read-the-dossier"></a>

## Read the Dossier

Roles, concession calendars, and open disputes are in [Who pays and who decides in grid expansion](/en/blog/who-pays-who-decides-grid/).

## References

1. <a id="ref-1"></a>[FERC Order No. 1000 — Transmission Planning and Cost Allocation](https://www.ferc.gov/sites/default/files/2020-04/OrderNo.1000.pdf). FERC. Accessed August 09, 2026.
2. <a id="ref-2"></a>[Edital Leilão de Transmissão nº 4/2025-ANEEL](https://ppi.gov.br/wp-content/uploads/2025/02/SEI_0202054_Edital_de_Leilao_04_2025.pdf). ANEEL / PPI. Accessed August 09, 2026.
3. <a id="ref-3"></a>[ONS — Submódulo 15.8 (Encargos de Uso do Sistema de Transmissão)](https://www.ons.org.br/ProcedimentosDeRede/M%C3%B3dulo%2015/Subm%C3%B3dulo%2015.8/Subm%C3%B3dulo%2015.8%202018.12.pdf). ONS. Accessed August 09, 2026.
4. <a id="ref-4"></a>[Regulation (EU) 2019/943 — Art. 18 network charges](https://eur-lex.europa.eu/eli/reg/2019/943/oj/eng). EUR-Lex. Accessed August 09, 2026.
5. <a id="ref-5"></a>[ACER — Cross-Border Cost Allocation (Reg. (EU) 2022/869 Art. 16)](https://www.acer.europa.eu/electricity/infrastructure/projects-common-interest/cross-border-cost-allocation). ACER. Accessed August 09, 2026.
6. <a id="ref-6"></a>[FERC Order No. 2023 explainer — interconnection cost allocation](https://www.ferc.gov/explainer-interconnection-final-rule). FERC. Accessed August 09, 2026.
7. <a id="ref-7"></a>[FERC Order No. 1920 explainer — transmission planning and cost allocation](https://www.ferc.gov/explainer-transmission-planning-and-cost-allocation-final-rule). FERC. Accessed August 09, 2026.
9. <a id="ref-9"></a>[Federal Power Act §205 — just and reasonable rates (16 U.S.C. §824d)](https://www.law.cornell.edu/uscode/text/16/824d). Cornell LII. Accessed August 09, 2026.
11. <a id="ref-11"></a>[Lei nº 9.427/1996 — cria a ANEEL](https://www.planalto.gov.br/ccivil_03/leis/l9427compilada.htm). Planalto. Accessed August 09, 2026.
12. <a id="ref-12"></a>[Decreto nº 5.081/2004 — regula o ONS](http://www.planalto.gov.br/ccivil_03/_ato2004-2006/2004/decreto/d5081.htm). Planalto. Accessed August 09, 2026.
13. <a id="ref-13"></a>[Decreto nº 12.068/2024 — prorrogação/licitação de concessões de distribuição](https://www.planalto.gov.br/ccivil_03/_ato2023-2026/2024/decreto/D12068.htm). Planalto. Accessed August 09, 2026.
16. <a id="ref-16"></a>[Lei nº 12.783/2013 — prorrogação de concessões e modicidade tarifária](https://www.planalto.gov.br/ccivil_03/_ato2011-2014/2013/lei/l12783.htm). Planalto. Accessed August 09, 2026.
17. <a id="ref-17"></a>[ACER Recommendation 02/2023 — CBCA good practices](https://acer.europa.eu/sites/default/files/documents/Recommendations/ACER_Recommendation_02-2023_CBCA.pdf). ACER. Accessed August 09, 2026.