Regulatory framework for asset light businesses

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Client EirGrid
Dates 2013
Service(s)Policy & Economics, Regulation & Competition
CEPA worked with EirGrid to consider the most appropriate overall regulatory model/framework for the licensed businesses within the EirGrid Group. EirGrid’s licensed businesses include EirGrid, the System Operator Northern Ireland (SONI) and the Single Electricity Market Operator (SEMO). These licensed businesses are currently subject to ex ante regulatory revenue controls, applying the traditional RPI-X based building block regulatory framework. EirGrid’s concern was that there is a mismatch between the current form of regulation and the risks, value added and desired outputs of EirGrid’s businesses which are asset light by comparison to traditional transmission companies.

CEPA worked collaboratively with EirGrid to investigate whether a mismatch does exist and to consider options for updating the regulatory regime to more closely match EirGrid’s business model. CEPA’s report to EirGrid considered the purpose of the regulatory regime and examples from existing regulatory practice that may be better adapted to the EirGrid model. Following development of the report, CEPA presented the results of its research to EirGrid’s senior management.