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Reference Models and Incentive Regulation of Electricity Distribution Networks: An Evaluation of Sweden's Network Performance Assessment Model (NPAM)

Author

Listed:
  • Tooraj Jamasb

    (Faculty of Economics University of Cambridge)

  • Michael Pollitt

    (Judge Business School University of Cambridge)

Abstract

The 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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Tooraj Jamasb & Michael Pollitt, 2007. "Reference Models and Incentive Regulation of Electricity Distribution Networks: An Evaluation of Sweden's Network Performance Assessment Model (NPAM)," Working Papers EPRG 0718, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    • Handle: RePEc:enp:wpaper:eprg0718
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    Cited by:

    1. Gilmar dos Santos Marques & Maria Amélia de Paula Dias & José Luiz de Andrade Franco, 2023. "Public Innovation Policy Evaluation: Brazilian Electricity Tariff Paid by Consumers," Sustainability, MDPI, vol. 15(13), pages 1-19, June.
    2. Angel Arcos-Vargas & Fernando Núñez & Juan Antonio Ballesteros, 2017. "Quality, remuneration and regulatory framework: some evidence on the European electricity distribution," Journal of Regulatory Economics, Springer, vol. 51(1), pages 98-118, February.
    3. Jamasb, T. & Söderberg, M., 2009. "Yardstick and Ex-post Regulation by Norm Model: Empirical Equivalence, Pricing Effect, and Performance in Sweeden," Cambridge Working Papers in Economics 0908, Faculty of Economics, University of Cambridge.
    4. Jesse D. Jenkins & Ignacio J. Perez-Arriaga, 2017. "Improved Regulatory Approaches for the Remuneration of Electricity Distribution Utilities with High Penetrations of Distributed Energy Resources," The Energy Journal, , vol. 38(3), pages 63-92, May.
    5. Pourheydari, Mohammad & Gholizadeh, Mahyar & Sadeghi, Shakiba & Hojjati, Ashkan & Goltapeh, Fatemeh, 2025. "A clustering scheme for performance benchmarking in the regulation of electric distribution utilities in Iran," Utilities Policy, Elsevier, vol. 93(C).
    6. Pezzini, Paola & Gomis-Bellmunt, Oriol & Frau-Valentí, Joan & Sudrià-Andreu, Antoni, 2010. "Energy efficiency optimization in distribution transformers considering Spanish distribution regulation policy," Energy, Elsevier, vol. 35(12), pages 4685-4690.
    7. Jesse D. Jenkins & Ignacio J. Pérez-Arriaga, 2017. "Improved Regulatory Approaches for the Remuneration of Electricity Distribution Utilities with High Penetrations of Distributed Energy Resources," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    8. van der Welle, Adriaan J. & de Joode, Jeroen, 2011. "Regulatory road maps for the integration of intermittent electricity generation: Methodology development and the case of The Netherlands," Energy Policy, Elsevier, vol. 39(10), pages 5829-5839, October.
    9. Keirstead, James, 2013. "Benchmarking urban energy efficiency in the UK," Energy Policy, Elsevier, vol. 63(C), pages 575-587.
    10. Tooraj Jamasb & Magnus Söderberg, 2010. "The Effects of Average Norm Model Regulation: The Case of Electricity Distribution in Sweden," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 36(3), pages 249-269, May.
    11. 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.
    12. Nijhuis, M. & Gibescu, M. & Cobben, J.F.G., 2017. "Analysis of reflectivity & predictability of electricity network tariff structures for household consumers," Energy Policy, Elsevier, vol. 109(C), pages 631-641.
    13. TEUSCH, Jonas, 2016. "Merger Incentives Under Yardstick Competition : a Theoretical Model," LIDAM Discussion Papers CORE 2016037, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    14. Erik Lundin, 2020. "Effects of Privatization on Price and Labor Efficiency: The Swedish Electricity Distribution Sector," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 247-274.
    15. Bovera, Filippo & Delfanti, Maurizio & Fumagalli, Elena & Lo Schiavo, Luca & Vailati, Riccardo, 2021. "Regulating electricity distribution networks under technological and demand uncertainty," Energy Policy, Elsevier, vol. 149(C).
    16. Arcos-Vargas, A. & Núñez-Hernández, F. & Villa-Caro, Gabriel, 2017. "A DEA analysis of electricity distribution in Spain: An industrial policy recommendation," Energy Policy, Elsevier, vol. 102(C), pages 583-592.
    17. Gómez, Tomás & Mateo, Carlos & Sánchez, Álvaro & Reneses, Javier & Rivier, Michel, 2011. "La retribución de la distribución de electricidad en España y el modelo de red de referencia/The Remuneration of Electricity Distribution in Spain and the Reference Network Model," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 29, pages 661(24.)-66, Agosto.

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    Keywords

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    JEL classification:

    • 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

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