Benchmarking investments under price-cap regulation

Abstract

This paper develops a new methodology for evaluating the combined price and quality performance of new electricity network investments under price-cap regulation. The basic idea is to simulate a large number of possible network configurations and use these as the benchmark for evaluating the distribution firm’s own investment proposal. The results of a case study indicate that the network simulation tool may provide the regulator with valuable information regarding the preferred network characteristics for the given supply area.

This paper develops a new methodology for evaluating the combined price and quality performance of new electricity network investments under price-cap regulation. The basic idea is to simulate a large number of possible network configurations and use these as the benchmark for evaluating the distribution firm’s own investment proposal. The results of a case study indicate that the network simulation tool may provide the regulator with valuable information regarding the preferred network characteristics for the given supply area.