Making the Belgian distribution system fit for the energy transition
Agrell, Per J.
Making the Belgian distribution system fit for the energy transition - 2015.
62
The regulatory environment of the Belgian distribution-system operators (DSOs) is undergoing major changes, as a result of which yardstick competition has fallen by the wayside. Specifically, we identify two critical developments. First, since July 2014, the regulation of DSOs has been assigned to the regional level, where the newly empowered regulators, confronted with a small intrajurisdictional basis for comparison, are unable to deploy yardstick competition. Second, due to the recent consolidation of DSOs in Wallonia and Flanders, there are now fewer independent operators that could be compared even if the regional regulators were to cooperate across Belgium. As the distribution system accounts for a large share of the total cost for the electricity system and faces significant challenges in the context of the decarbonization agenda, modern regulation can potentially bring sizeable benefits for consumers. After setting the context, this paper makes the case for increased scrutiny of DSO regulation, explains why yardstick competition plays such an important role in the regulatory toolbox, reflects upon the prospects of yardstick competition against the background of recent developments in Belgium, and reviews concrete policy options. JEL classification – L51, L94, L95, C53, C114
Making the Belgian distribution system fit for the energy transition - 2015.
62
The regulatory environment of the Belgian distribution-system operators (DSOs) is undergoing major changes, as a result of which yardstick competition has fallen by the wayside. Specifically, we identify two critical developments. First, since July 2014, the regulation of DSOs has been assigned to the regional level, where the newly empowered regulators, confronted with a small intrajurisdictional basis for comparison, are unable to deploy yardstick competition. Second, due to the recent consolidation of DSOs in Wallonia and Flanders, there are now fewer independent operators that could be compared even if the regional regulators were to cooperate across Belgium. As the distribution system accounts for a large share of the total cost for the electricity system and faces significant challenges in the context of the decarbonization agenda, modern regulation can potentially bring sizeable benefits for consumers. After setting the context, this paper makes the case for increased scrutiny of DSO regulation, explains why yardstick competition plays such an important role in the regulatory toolbox, reflects upon the prospects of yardstick competition against the background of recent developments in Belgium, and reviews concrete policy options. JEL classification – L51, L94, L95, C53, C114
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