Although there is no universally accepted methodology for restructuring of electricity supply industry, the transformations often involve separation of generation and transmission. Such separation results in a need for a transmission service charge to be levied on the system users. The National Energy Policy Office (NEPO) of Thailand has commissioned PricewaterhouseCooper (PwC) to propose a transmission service charge that is to be used during the market reform for the transmission business unit of the Electricity Generating Authority of Thailand (EGAT). Although the PwCs transmission use of system charge (TUOS) based on the long-run average incremental cost (LRAIC) and average transmission loss can satisfy the financial requirements, the charge allocations are not economically efficient since the do not provide any locational signal which could reflect costs imposed oil the system by locating a svstem user in a particular geographical location. This paper describes the TUOS methodology suggested by PwC and makes a comparison with a transmission pricing method based on combination of the electricity tracing and LRAIC. The results indicate that. with electricity tracing, the charge allocations are improved in terms of fairness, as the charge reflects the geographical location and system conditions. (C) 2002 Elsevier Science Ltd. All rights reserved.