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Balancing Incentives: The Development and Application of a Regulatory Benchmarking Model

In: Productivity and Efficiency Analysis

Author

Listed:
  • Roar Amundsveen

    (The Norwegian Water Resources and Energy Directorate)

  • Hilde Marit Kvile

    (The Norwegian Water Resources and Energy Directorate)

Abstract

The main contribution in this paper is a presentation and discussion of issues that arise in the practical application of a regulatory benchmarking model. We describe the regulatory benchmarking model for electricity distribution companies in Norway, and we focus on how different choices influence different incentives for the companies. These choices cover methodology, modelling assumptions and variables, but also how the benchmarking results are applied in the regulatory model. The benchmarking model is only one part of the regulatory model for setting revenue caps. This discussion shows some of the trade-offs that have to be considered in this process, and sheds some light on why regulators may deviate from optimal text-book solutions.

Suggested Citation

  • Roar Amundsveen & Hilde Marit Kvile, 2016. "Balancing Incentives: The Development and Application of a Regulatory Benchmarking Model," Springer Proceedings in Business and Economics, in: William H. Greene & Lynda Khalaf & Robin Sickles & Michael Veall & Marcel-Cristian Voia (ed.), Productivity and Efficiency Analysis, edition 1, chapter 0, pages 233-247, Springer.
    • Handle: RePEc:spr:prbchp:978-3-319-23228-7_14
    DOI: 10.1007/978-3-319-23228-7_14
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    Citations

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    Cited by:

    1. Saastamoinen, Antti & Bjørndal, Endre & Bjørndal, Mette, 2017. "Specification of merger gains in the Norwegian electricity distribution industry," Energy Policy, Elsevier, vol. 102(C), pages 96-107.
    2. Ørjan Mydland, 2020. "Lost economies of scope and potential merger gains in the Norwegian electricity industry," Empirical Economics, Springer, vol. 58(6), pages 3077-3100, June.
    3. Musau, Andrew & Kumbhakar, Subal C. & Mydland, Ørjan & Lien, Gudbrand, 2021. "Determinants of allocative and technical inefficiency in stochastic frontier models: An analysis of Norwegian electricity distribution firms," European Journal of Operational Research, Elsevier, vol. 288(3), pages 983-991.

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