Multi-Period Dea Incentive Regulation in Electricity Distribution

Multi-period multi-product regulatory schemes for electricity distributors are presented, based on cost information from a productivity analysis model and an agency theoretical decision model. The proposed schemes are operational and demonstrate considerable advantages compared to the popular CPI-X revenue cap regulation. The schemes avoid arbitrariness, too high or negative informational rents as well as ratchet effects and they promote rapid productivity catch-up by making full use of available data. More generally, the paper contributes to the theoretical unification between firm-based Data Envelopment Analysis (DEA) productivity models and micro-economic reimbursement theories.

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