The German regulatory authority, Bundesnetzagentur, has today published the final version of a Frontier report on cost benchmarking of German gas distribution system operators (DSOs). The report finds that the average efficiency of gas DSOs for the current third regulatory period (2018-2022) increases compared to previous regulatory periods.
Cost benchmarking represents an important pillar of the German regulatory system for energy network operators. As part of its “incentive regulation”, the regulator sets annual revenue caps for network operators taking into account individual and general productivity targets. In the report, Frontier derives the individual efficiency targets for the gas DSOs for the third regulatory period starting January 2018. The analysis is based on Stochastic Frontier Analyses (SFA) and Data Envelopment Analysis (DEA). The third regulatory period introduced a few changes to the way the benchmarking is conducted, including increased flexibility regarding the design of the model describing the costs of network’s operation.
Between the first benchmarking analysis of gas DSO in 2008 and the second in 2012, average efficiency increased from 87.1% to 92.1%. The most recent analysis suggests a more moderate increase to 92.4%.
Frontier regularly advises public and private sector clients on energy network regulation.
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