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Benchmarking and regulation

Author

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  • AGRELL, Per

    () (Université catholique de Louvain, CORE & Louvain School of Management, Belgium)

  • BOGETOFT, Peter

    () (Copenhagen Business School, Denmark)

Abstract

Benchmarking 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.

Suggested Citation

  • AGRELL, Per & BOGETOFT, Peter, 2013. "Benchmarking and regulation," CORE Discussion Papers 2013008, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2013008
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    File URL: http://uclouvain.be/cps/ucl/doc/core/documents/coredp2013_8.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Agrell, Per J. & Brea-Solís, Humberto, 2017. "Capturing heterogeneity in electricity distribution operations: A critical review of latent class modelling," Energy Policy, Elsevier, vol. 104(C), pages 361-372.
    2. Bjørndal, Endre & Bjørndal, Mette & Cullmann, Astrid & Nieswand, Maria, 2016. "Finding the Right Yardstick: Regulation under Heterogeneous Environments," Discussion Papers 2016/4, Norwegian School of Economics, Department of Business and Management Science.
    3. Gert Brunekreeft, 2012. "On the Role of International Benchmarking of Electricity Transmission System Operators facing significant investment requirements," Bremen Energy Working Papers 0012, Bremen Energy Research.
    4. Maria Nieswand & Stefan Seifert, 2016. "Operational Conditions in Regulatory Benchmarking Models: A Monte Carlo Analysis," Discussion Papers of DIW Berlin 1585, DIW Berlin, German Institute for Economic Research.

    More about this item

    Keywords

    agency theory; regulation; energy networks;

    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; Threshold Regression Models

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