Technical and economic aspects of the new replacement value of the yardstick competition model in distribution regulation

In this paper are analyzed the main technical and economic issues of the new replacement value (NRV) in the yardstick competition model. Currently the price cap and the yardstick competition are two of most common regulation models adopted in several electricity distribution markets. For application of the yardstick competition model, a distribution utility has to conduct a comparison with an efficient model company and for this reason must valorize their new replacement values. The NRV may be defined as the opportunity cost of replacing today the existent facilities of any electrical utility. A description of the NRV characteristics and components are also included.