Mandatory cost allocation arises as a necessity when voluntary investment may not be
sufficient to support efficient expansion; i.e., when F+G+H>TC>G. This condition
presumes a material change in prices and a scale of transmission investment that
substantially exceeds the scale of individual generation or load. In other words, if
individual load in the importing region is too small to capture all but a fraction of F, or of
H for generators in the exporting region, then there is an effective externality from the
cost of aggregating many small participants. The benefits that are easy to capture,
namely G and a small fraction of F+H, would not be enough to cover the cost TC.
Without some way to aggregate the beneficiaries and share the costs voluntary, efficient
transmission investment would not be supported.