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Incentive Regulation of Electricity and Gas Networks in the UK: From RIIO-1 to RIIO-2

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Abstract

The regulatory and operating context of energy networks is dynamic and constantly evolving. Achieving a multitude of economic, environmental, social and policy objectives is a challenging task for the sector regulators. In 2010, the UK energy regulator Ofgem replaced its approach to energy network price control and incentive regulation with a Revenue-Incentive-Innovation-Output (RIIO-1) model. This paper reviews the incentive areas that influence the performance of the next version of the model (RIIO-2). Guided by the principals of regulatory economics and evidence in the literature, we discuss key aspects of the regulation model that be revised by the regulator. The lessons of experience from the RIIO models are also relevant for regulators in other countries and can inform their design of incentive regulation of energy networks.

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  • Jamasb, Tooraj, 2020. "Incentive Regulation of Electricity and Gas Networks in the UK: From RIIO-1 to RIIO-2," Working Papers 1-2020, Copenhagen Business School, Department of Economics.
    • Handle: RePEc:hhs:cbsnow:2020_001
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    File URL: http://hdl.handle.net/10398/9794
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    Cited by:

    1. Bogetoft, Peter & Eskesen, Anita, 2022. "Balancing information rents and service differentiation in utility regulation," Energy Economics, Elsevier, vol. 106(C).

    More about this item

    Keywords

    energy network; incentive regulation; rate of return; cost of capital; benefit sharing; menu of options;
    All these keywords.

    JEL classification:

    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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