Oxera, in collaboration with Dr Eva Deuchert of Netze BW, will be publishing a series of articles in ew – Magazin für die Energiewirtschaft on Bundesnetzagentur’s current benchmarking procedure for assessing the efficiency of energy networks.

Building on insights gained from working on energy issues in Germany, as well as similar issues in several other European jurisdictions, the articles will describe and evaluate the key building blocks of Bundesnetzagentur’s efficiency analysis, in a non-technical and intuitive manner. In the spirit of further strengthening the regulatory benchmarking framework, we make suggestions for the development and application of Bundesnetzagentur’s analysis using empirical evidence on the latest published data on the gas and electricity distribution system operators (DSOs).

We hope that our recommendations, which are consistent with scientific literature and the German Incentive Ordinance (ARegV), will provide valuable input into the development of a more robust estimation of the efficiency targets for the DSOs. We also believe that there are valuable read across to the framework used to assess the efficiency of German gas transmission operators as well as to the benchmarking frameworks considered in other European jurisdictions.

From October 2018 to March 2019, the articles will examine the following aspects:

• which of the benchmarking methods—data envelopment analysis or stochastic frontier analysis—determines the efficiency targets for the DSOs, and why
• what impact does Bundesnetzagentur’s focus on model size, in terms of the maximum number of cost drivers to be included in the cost models, have on the outcome and whether it is appropriate.
• whether the different functional forms (i.e. the relationship imposed between total expenditure and the cost drivers) considered in Bundesnetzagentur’s benchmarking procedure is appropriate and its implications
• whether Bundesnetzagentur’s current approach to identifying outliers (i.e. influential data) in the benchmarking methods ensures appropriate comparisons, and our recommendations on alternative approaches
• a review of Bundesnetzagentur’s current model validation approach in light of academic and regulatory best practice

Links to the articles will be made available on our website as and when they are published by ew – Magazin für die Energiewirtschaft. English versions of the articles will also be made available once all the articles are published.

We are organising two webinars, in German and English, in early November to disseminate ideas contained in the articles. Please get in touch with the contacts below if you are interested in joining them. We will share details of the webinars shortly. 

Contact:

Dr Anton Burger 
Senior Consultant
Direct: +49 (0) 30 7675 99101

Tel: +49 (0) 30 7675 99100

Dr Srini Parthasarathy
Principal and co-head of Oxera efficiency practice
Direct: +44 (0) 20 7776 6612

Mobile: +44 (0) 7741 263767