IDEAS home Printed from
   My bibliography  Save this paper

Simulating the restructuring of the Flemish electricity distribution sector


  • Guido Pepermans

    () (K.U.Leuven, C.E.S., Energy, Transport and Environment)


In Flanders (Belgium), distribution companies are to a large extent owned by the municipalities and as such these municipalities collect an important share of the profits from electricity distribution. This situation (by many it is seen as a hidden tax) cannot be maintained because, in the process of electricity market liberalisation, the ownership will be reshuffled and because the old regulation mechanism, allowing for such cash flows, will be revised. This paper presents some simulations on the restructuring of the electricity distribution sector, using a partial equilibrium model. The focus of the simulations is on the impact of the choice of the regulation mechanism on prices and on the municipalities' budget. Three regulation schemes are simulated, 'rate-of-return' (ROR) regulation, 'constant profit per unit of output' (CPU) regulation and 'price-cap' (PC) regulation. The simulations show that, irrespective of the regulation scheme, it is not obvious that end-user electricity prices will decrease after the liberalisation. Moreover, the restructuring will have a large impact on the profits received by the municipalities. The sign of this impact depends on the regulation mechanism that is imposed, but it appears that, from the three regulation mechanisms that were analysed, the ROR mechanism performs worst, both in terms of municipal cash flows and of economic welfare.

Suggested Citation

  • Guido Pepermans, 2003. "Simulating the restructuring of the Flemish electricity distribution sector," Energy, Transport and Environment Working Papers Series ete0301, KU Leuven, Department of Economics - Research Group Energy, Transport and Environment.
  • Handle: RePEc:ete:etewps:ete0301

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Christian Dreger & Manuel Artís & Rosina Moreno & Raúl Ramos & Jordi Suriñach, 2007. "Study on the feasibility of a tool to measure the macroeconomic impact of structural reforms," European Economy - Economic Papers 2008 - 2015 272, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.

    More about this item


    Electricity distribution; Electricity markets; Electricity modelling; Regulation; Strategic behaviour;

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ete:etewps:ete0301. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (library EBIB). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.