Continental incentive regulation

Abstract

There is no fail-safe blueprint for the regulation of electricity grids. Even the most successful regulatory model may not deliver good results when applied to a specific country. There are at least three reasons for this. First, contrary to what is commonly assumed by the standard theory of regulation, national regulators, even within the EU, differ in administrative powers, financial endowment, staff and technical skills available. Second, transmission and distribution companies perform a set of different network tasks with their own economic and regulatory characteristics. Finally, the surrounding conditions are not the same everywhere but can widely differ for a variety of reasons (typology and distribution of generators and loads, stage of the investment cycle, interconnections with foreign networks, etc.). In this multi-faceted context, NRAs must pursue a workable regulatory alignment, able to match the most suitable regulatory tool with the characteristics of the targeted network task and the NRA’s capabilities.