Marginal cost pricing is a mechanism of financing and pricing public services. Marginal Cost Pricing charges users the cost of providing one additional unit, i.e. the marginal cost, of a service - sewer, water, electricity, etc. This is in contrast to the average cost pricing of municipal services which charges all users the same rate irrespective or whether they consume the first unit or the last unit of a service. Marginal cost pricing is most applicable in instances where the service is expanded on an small, incremental basis.