Incentive Regulation of Electricity and Gas Networks in the UK: From RIIO-1 to RIIO-2

No 1-2020, Working Papers from Copenhagen Business School, Department of Economics

Abstract: The regulatory and operating context of energy networks is dynamic and constantly evolving. Achieving a multitude of economic, environmental, social and policy objectives is a challenging task for the sector regulators. In 2010, the UK energy regulator Ofgem replaced its approach to energy network price control and incentive regulation with a Revenue-Incentive-Innovation-Output (RIIO-1) model. This paper reviews the incentive areas that influence the performance of the next version of the model (RIIO-2). Guided by the principals of regulatory economics and evidence in the literature, we discuss key aspects of the regulation model that be revised by the regulator. The lessons of experience from the RIIO models are also relevant for regulators in other countries and can inform their design of incentive regulation of energy networks.

Keywords: energy network; incentive regulation; rate of return; cost of capital; benefit sharing; menu of options (search for similar items in EconPapers)
JEL-codes: K23 L51 L52 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2020-02-06
New Economics Papers: this item is included in nep-ene and nep-reg
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Citations: View citations in EconPapers (1)

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Journal Article: Incentive Regulation of Electricity and Gas Networks in the UK: From RIIO-1 to RIIO-2 (2021)
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