Reference Models and Incentive Regulation of Electricity Distribution Networks: An Evaluation of Sweden's Network Performance Assessment Model (NPAM)

Tooraj Jamasb*, Michael Pollitt

*Corresponding author af dette arbejde

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

Abstrakt

Electricity sector reforms across the world have led to a search for innovative approaches to regulation that promote efficiency in the natural monopoly distribution networks and reduce their service charges. To this aim, a number of countries have adopted incentive regulation models based on efficiency benchmarking. While most regulators have used parametric and non-parametric frontier-based methods of benchmarking some have adopted engineering-designed “reference firm” or “norm” models. This paper examines the incentive properties and related aspects of the reference firm model—NPAM—as used in Sweden and compares this with frontier-based benchmarking methods. We identify a number of important differences between the two approaches that are not readily apparent and discuss their ramifications for the regulatory objectives and process. We conclude that, on balance, the reference models are less appropriate as benchmarks than real firms. Also, the implementation framework based on annual ex-post reviews exacerbates the regulatory problems mainly by increasing uncertainty and reducing the incentive for innovation.
OriginalsprogEngelsk
TidsskriftEnergy Policy
Vol/bind36
Udgave nummer5
Sider (fra-til)1788-1801
Antal sider14
ISSN0301-4215
DOI
StatusUdgivet - 2008
Udgivet eksterntJa

Emneord

  • Electricity
  • Regulation
  • Benchmarking

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