Harmonizing the Nordic Regulation of Electricity Distribution
AbstractRegulators for electricity network infrastructure, such as electricity distribution system operations (DSO) face some particular challenges in the Nordic countries. Due to institutional, economic and historical reasons the DSOs in the Nordic area are relatively numerous and heterogeneous in terms of ownership structure, size and operating conditions. Since the deregulation in 1994-1999, the national regulators have independently devised regulation mechanisms that address the heterogeneity through econometric or engineering cost models as a basis for high- powered regimes. The frontier analysis models (such as Data Envelopment Analysis in e.g. Norway and Finland) are particularly useful here, given their incentive properties and cautious estimation of the production set. However, the total information rents in yardstick regimes and the bias in the frontier estimation are related to the number of observations (firms), which undermine their future application in the Nordic area under increasing interregional concentration. This paper develops a proposal for an alternative model, the revenue-yardstick model, that can be ap- plied across the national regulations and permit frontier estimations on final user cost rather than cost estimates, sensitive to e.g. capital cost estimates, periodisation and allocation keys. The core of the model is a dynamic frontier yardstick model such as Agrell, Bogetoft and Tind (2005), but here applied only to strictly exogenous conditions, the output dimensions and the claimed revenues of the DSO. An equilibrium is implemented using asymmetric penalties for positive and negative deviations from the ex post frontier revenue, the yardstick, using the classic superefficiency model in analogy with Shleifer (1985). The model is particularly aimed at an international (interregional) application as it may embed national differences in regulation without jeopardizing the long-term sustainability of the model.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Université catholique de Louvain in its series Open Access publications from Université catholique de Louvain with number info:hdl:2078/24520.
Date of creation: 2010
Date of revision:
Contact details of provider:
Web page: http://www.uclouvain.be
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Agrell, Per Joakim, 2004. "Evolutionary Regulation: from CPI-X towards Contestability," Open Access publications from UniversitÃ© catholique de Louvain info:hdl:2078/18397, Université catholique de Louvain.
- AGRELL, Per & FARSI, Mehdi & FILIPPINI, Massimo & KOLLER, Martin, 2013.
"Unobserved heterogeneous effects in the cost efficiency analysis of electricity distribution systems,"
CORE Discussion Papers
2013003, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Per J. Agrell & Mehdi Farsi & Massimo Filippini & Martin Koller, 2013. "Unobserved heterogeneous effects in the cost efficiency analysis of electricity distribution systems," Working Papers 0038, Swiss Economics.
- Per J. Agrell & Mehdi Farsi & Massimo Filippini & Martin Koller, 2013. "Unobserved heterogeneous effects in the cost efficiency analysis of electricity distribution systems," CER-ETH Economics working paper series 13/171, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
- Agrell, Per J. & Bogetoft, Peter & Mikkers, Misja, 2013.
"Smart-grid investments, regulation and organization,"
Elsevier, vol. 52(C), pages 656-666.
- AGRELL, Per & BOGETOFT, Peter, 2011. "Smart-grid investments, regulation and organization," CORE Discussion Papers 2011072, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- AGRELL, Per J. & BOGETOFT, Peter & MIKKERS, Misja, . "Smart-grid investments, regulation and organization," CORE Discussion Papers RP -2457, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Fabrizio Tinti).
If references are entirely missing, you can add them using this form.