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Managing Regulatory Risk

RWE Energy – Electricity Distribution Cost Benchmarking


MA were commissioned to carry out a benchmarking exercise to compare and contrast the cost efficiency of distribution of electricity of two German DSOs, Rhein-Ruhr (“RR”) and Westfalen-Weser-Ems (“WWE”), against distribution companies in other selected European countries..

The outputs of this benchmarking exercise were as follows:

  • A benchmarking comparison of RWE costs (RR, WWE) against other power DSO's in Europe
  • A best-fit cost function and appropriate efficiency model using regression and data envelopment analysis (DEA)
  • An assessment of the implications of the benchmarking project for RWE’s overall incentive regulation project

Upon completion of this comparative exercise, the benchmarking model was disclosed to RWE so that it could include other distribution companies in its own research work.

Comparative cost data was obtained from UK, Netherlands, Norway, Finland and Austria. Our findings were used by RWE as a basis for its discussions with the German regulator regarding the formulae to be adopted in connection with tariff restrictions to be imposed on RWE’s DSO business.

Enron Europe

At the time of the controversial UK Coal Review, in 1992, we helped the world's largest integrated gas company persuade the government and opinion-formers that buying more time for the UK coal industry by imposing restrictions on the development of gas-fired power generation would not be in the best interests of the economy and consumers.

This successful campaign involved detailed research and political and media lobbying, and led to a major expansion in gas fired generation in the UK.

Electricity Pool of England and Wales

Between 1995-1998, MA devised and executed for the Pool and the CEO a series of promotional and communications initiatives relating to the Government’s decision to reform the wholesale electricity market.
This has involved detailed market research, the preparation of position papers, bulletins and briefings covering the operation of the market, and implementation of the OFGEM reforms and extensive political and media relations.

British Wind Energy Association (BWEA)

In 1994, MA prepared for BWEA a detailed economic analysis of the relative costs of wind power generation vis a vis fossil fuel and nuclear power. Our research was used by the BWEA to promote the case of wind power subsidies in the UK parliament.