International Benchmarking and Yardstick Regulation: An Application to European Electricity Utilities

Abstract

Due to a shortage of data and increased international mergers, national energy regulators are looking to international benchmarking analyses for help in setting price controls within incentive regulation. We present an international benchmarking study of 63 regional electricity distribution utilities in 6 European countries that aims to illustrate the methodological and data issues encountered in the use of international benchmarking for utility regulation. The study examines the effect of the choice of benchmarking methods using DAE, COLS and SFA models. We discuss what problems of international benchmarking are highlighted by the study and how they can be overcome.