Reference Models and Incentive Regulation of Electricity Distribution Networks: An Evaluation of Sweden’s Network Performance Assessment Model (NPAM)
AbstractThe world-wide electricity sector reforms have led to a search for alternative and innovative approaches to regulation to promote efficiency improvement in the natural monopoly electricity networks. A number of countries have used incentive regulation models based on efficiency benchmarking of the electricity network utilities. While most regulators have opted adopted parametric and non-parametric frontier-based methods of benchmarking some have used engineering designed ‘reference firm’ or ‘norm’ models for the purpose. This paper examines the incentive properties and other related aspects of the norm model NPAM used in regulation of distribution networks in Sweden and compares these with those of frontier-based benchmarking methods. We identify a number of important differences between the two approaches to regulation benchmarking that are not readily apparent and discuss their ramifications for the regulatory objectives and process.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0747.
Date of creation: Sep 2007
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Electricity; regulation; benchmarking.;
Other versions of this item:
- Jamasb, Tooraj & Pollitt, Michael, 2008. "Reference models and incentive regulation of electricity distribution networks: An evaluation of Sweden's Network Performance Assessment Model (NPAM)," Energy Policy, Elsevier, vol. 36(5), pages 1788-1801, May.
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
- L97 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Utilities: General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-09-30 (All new papers)
- NEP-EFF-2007-09-30 (Efficiency & Productivity)
- NEP-ENE-2007-09-30 (Energy Economics)
- NEP-REG-2007-09-30 (Regulation)
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