Frontier advises on Russian incentive regulation of electricity networks
Russian authorities are in the process of designing the regulatory regime for the natural monopoly activities of providing electricity transmission and distribution network services.
As input to the design process, Frontier (London) presented at a symposium from 23rd to 26th September on incentive regulation of electricity networks. The symposium, which was organised by RCI, was attended by senior staff of the Russian network regulator, energy policy makers and energy companies.
Mike Huggins and Yulia Urozhaeva presented details of Ofgem’s approach to setting allowed revenues for electricity distribution networks in Great Britain, and the suitability of applying this approach to Russia. Their discussion covered the way in which the regulator sets allowed revenues, with a specific focus on how to set and update regulatory asset values and how to treat capital investments. They explored the different methods that have been employed by regulators and described the rational for certain choices. They also discussed the incentive properties of the British arrangements and highlighted some of the ongoing debates over the future course of regulation.
They finished by identifying the key policy questions that must be answered if Russia intends to implement a system similar to the British one.
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