Analysing the directing signals of the economic regulation

In this paper, the methodology for holistic analysis of the directing signals of the economic regulation in the electricity distribution business is presented. Major focus is on the effects of the regulatory benchmarking. The basic idea of such analysing methodology is to calculate how certain changes in the input parameters affect the regulatory allowed incomes, by taking into account the effects of the efficiency benchmarking, quality adjustment, and regulatory asset base. This methodology is used successfully during the analysis and development of the regulatory benchmarking model, used in Finnish electricity distribution sector. This development process is illustrated in the paper as the practical application of the methodology.