Toward a new system for allocating the cost of capacity.

by Edward B. Berman

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A presentation of a new concept of capacity cost. In this system a requirement for an additional unit of capacity does not lead either to no cost if the unit is already available or to the full cost of building an additional unit if it is not already available. The former event implies a cost because it advances the time when it is expected that an additional unit of capacity be constructed. The latter event offers a savings to offset the full cost of constructing a unit of capacity in the form of a probability that the unit now constructed would have been needed for the next generation anyway. (Presented before the Joint Study Group on Resource Allocation Methodology at Menlo Park, California, May 23-25, 1960.) 14 pp.

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