This paper presents a new method to allocate the transmission cost among generators and loads. The allocation is calculated for each transmission line through the identification and quantification of a fair distribution of both generators and loads. This method is based on circuit theory using modified impedance matrix. A two-step scheme is performed here: (1) in order to determine the participation of generators in the costs of the transmission network the generators are modeled as current sources and loads as constant impedances. (2) to determine the contributions of loads in the cost of the transmission network the loads are modeled as current sources and generators as constant impedances. Numerical results with a four-bus test system, as well as with IEEE 24-bus test system are reported and discussed to demonstrate the applicability of the proposed method. © 2014 Elsevier Ltd. All rights reserved.