The Consequences for Consumer Welfare of the 2001-2003 Electricity Distribution Price Review in The Netherlands

The Dutch regulatory process for setting the first X-Factors in the electricity distribution sector has gone badly wrong. During two-and-a-half years four different X-Factors were published by the regulator. These X-Factors fluctuated wildly. We demonstrate that Dutch electricity consumers will pay at least €300mln. more over three years for the distribution of electricity than might otherwise have been the case. We estimate that benefits for companies in terms of extra revenue from lowered X-Factors amounts to 3~5 percent of total asset value. We provide a history of the regulatory process and analyse the impact of the different X-Factors on the final bills of consumers. The negative political reaction to the perceived problems of regulation has hampered the course of deregulation and the privatisation of the municipally-owned electricity companies. The Minister of Economic Affairs and the majority of Parliament want the complete ownership unbundling of the sector by 1 January 2007.electricity, price review, RPI-X, Netherlands, distribution networks

The future of electricity distribution regulation: Lessons from international experience

This thesis contains five essays on the regulation of electricity distribution networks, each presenting a different point of view. Two essays use US data to demonstrate that incentive-based regulation has valuable application within a management setting and can lead to gaming behaviour within a regulatory setting. One essay discusses the lessons that can be drawn from the failed first electricity distribution price control review in the Netherlands. One essay presents the views of 75 international regulation managers and gives recommedations on ways to improve the regulatory quality and process. The final essay analyses the economic consequences of the forced ownership unbundling of the electricity distribution networks in 1998 in New Zealand, and draws lessons for future structural remedies that may be sought in other countries