E-control Austria Discusses Incentive-based Regulations in Energy Sector
Tuesday, 03 December, 2013

On November 28, ISET hosted a seminar delivered by two experts working for E-control Austria – Eszter Suele (Resident Twinning Advisor) and Leo Kammerdiener (Senior Tariff and Regulatory Expert). E-control Austria is collaborating with the Georgian National Energy and Water Supply Regulatory Commission (GNERC) under a “Twinning Project” to improve the Georgian electricity regulation that promotes long-term investments and helps establish methods of tariff calculation in line with European Union standards and best practices, namely incentive-based tariff regulations.

Eszter Suele introduced the “Twinning Project” itself and discussed the motivation, goals and objectives, and the step-by-step schedule of the project, while Leo Kammerdiener presented various existing models of incentive-based regulation, demonstrating their advantages and disadvantages compared to the simple cost-based regulation and the difficulties they face in practice.

The presenter first introduced the original simple cost-based regulation featuring WACC and risk elements (Beta-factor), explaining its limitations, which led to the development of the more sophisticated “smart” incentive-based systems. Then the different incentive-based regulatory models were introduced: “Profit-Splitting”, “Revenue-Splitting”, “Revenue-Cap”, “Price-Cap” and “Yardstick”.

The school would like to thank the presenters for providing an interesting and comprehensive presentation to the ISET community.