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The Consequences for Consumer Welfare of the 2001-2003 Electricity Distribution Price Review in The Netherlands

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  • Paul H. L. Nillesen

    (Corporate Finance & Recovery PricewaterhouseCoopers De Entree 201 Amsterdam, The Netherlands)

  • Michael G. Pollitt

    (Business Economics Judge Institute of Management Cambridge)

Abstract

The Dutch regulatory process for setting the first X-Factors in the electricity distribution sector has gone badly wrong. During two-and-a-half years four different X-Factors were published by the regulator. These X-Factors fluctuated wildly. We demonstrate that Dutch electricity consumers will pay at least €300mln. more over three years for the distribution of electricity than might otherwise have been the case. We estimate that benefits for companies in terms of extra revenue from lowered X-Factors amounts to 3~5 percent of total asset value. We provide a history of the regulatory process and analyse the impact of the different X-Factors on the final bills of consumers. The negative political reaction to the perceived problems of regulation has hampered the course of deregulation and the privatisation of the municipally-owned electricity companies. The Minister of Economic Affairs and the majority of Parliament want the complete ownership unbundling of the sector by 1 January 2007.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Paul H. L. Nillesen & Michael G. Pollitt, 2004. "The Consequences for Consumer Welfare of the 2001-2003 Electricity Distribution Price Review in The Netherlands," Working Papers EP50, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    • Handle: RePEc:enp:wpaper:ep50
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    References listed on IDEAS

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    6. Severin Borenstein & James B. Bushnell & Frank A. Wolak, 2002. "Measuring Market Inefficiencies in California's Restructured Wholesale Electricity Market," American Economic Review, American Economic Association, vol. 92(5), pages 1376-1405, December.
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    Cited by:

    1. Jamasb, Tooraj & Pollitt, Michael, 2007. "Incentive regulation of electricity distribution networks: Lessons of experience from Britain," Energy Policy, Elsevier, vol. 35(12), pages 6163-6187, December.
    2. Brunekreeft, G. & McDaniel, T., 2005. "Policy uncertainty and supply adequacy in electric power," Discussion Paper 2005-006, Tilburg University, Tilburg Law and Economic Center.
    3. Mehdi Farsi & Aurelio Fetz & Massimo Filippini, 2007. "Benchmarking and Regulation in the Electricity Distribution Sector," CEPE Working paper series 07-54, CEPE Center for Energy Policy and Economics, ETH Zurich.
    4. Mehdi Farsi & Massimo Filippini & William Greene, 2006. "Application Of Panel Data Models In Benchmarking Analysis Of The Electricity Distribution Sector," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 77(3), pages 271-290, September.
    5. Eva Niesten, 2010. "Identifying options for regulating the coordination of network investments with investments in distributed electricity generation," CPB Discussion Paper 141, CPB Netherlands Bureau for Economic Policy Analysis.

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    More about this item

    Keywords

    electricity; price review; RPI-X; Netherlands; distribution networks;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy

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