Benchmarking and regulation
AbstractBenchmarking methods, and in particular Data Envelopment Analysis (DEA), have become well-established and informative tools for economic regulation. DEA is now routinely used by European regulators to set reasonable revenue caps for energy transmission and distribution system operators. The application of benchmarking in regulation, however, requires specific steps in terms of data validation, model specification and outlier detection that are not systematically documented in open publications, leading to discussions about regulatory stability and economic feasibility of these techniques. In this paper, we review the modern foundations for frontier-based regulation and we discuss its actual use in several jurisdictions.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2013008.
Date of creation: 26 Apr 2013
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agency theory; regulation; energy networks;
Find related papers by JEL classification:
- Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
- L59 - Industrial Organization - - Regulation and Industrial Policy - - - Other
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-04 (All new papers)
- NEP-CWA-2013-06-04 (Central & Western Asia)
- NEP-EFF-2013-06-04 (Efficiency & Productivity)
- NEP-ENE-2013-06-04 (Energy Economics)
- NEP-REG-2013-06-04 (Regulation)
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