Integration of price cap and yardstick competition schemes in electrical distribution regulation

Abstract

Disadvantages of traditional "rate of return" regulation for distribution tariffs have led to he development of new regulatory schemes to stimulate efficiency in the provision of the service, under what has been called "benchmark regulation." The paper assesses the Chilean "model company" regulation that aims at making the private distribution monopoly compete with a reference efficient model company, through a "yardstick competition" approach. It compares it with the "price cap" scheme used in electricity distribution in England and Wales. It contributes with a proposal to integrate both schemes. The proposed hybrid methodology is developed and evaluated, capturing the best characteristics of both regulatory schemes. Mathematical models to relate operational costs with electrical variables are developed.

DEA Efficiency for the Determination of the Electric Power Distribution Added Value

“…The adjustment of the VAD is equivalent to displace the efficiency frontier toward the average VAD, in accordance to the results that could be found with average costs functions [8], [11].…”

“…The methodology followed for its determination can be essentially grouped into four stages [10], [11]:…”

A comprehensive model of virtual competition in distribution energy systems

“…YC is a hot research topic and has a wide range of application in naturally monopoly social services [11] such as water and sewerage services [12] and also in electric distribution systems [13][14][15][16][17]. Practical application of the integration of YC intro PC can be seen in the Netherlands, where the regulator Directie Toezicht Energie (DTe) introduces a YC system into its PC, which means the PC will be based on the average efficiency improvement of the sector [18].…”

Definition of Efficient References for Regulatory Benchmarking of Distribution Companies

“…Specifically, in its solution process, the method uses DEA to identify the efficient companies to later form group by solving a-median problem. As a methodology, the DEA has been successfully used in other realms of regulation [8]. This article aims to expand the methodological scope that currently exists regarding this field.…”