Setting Incentives for Truth-Telling and Efficiency
21 October 2005
By Graham Shuttleworth
In the last regulatory review of the electricity distribution network operators, Ofgem introduced a new technique, based on economic theory, to encourage truth-telling in the UK energy sector. Although this technique proved useful, in the end Ofgem still had to scrutinize electric utilities' investment plans. In this article, published in the 21 October 2005 issue of Power UK, NERA Director Graham Shuttleworth discusses the various challenges Ofgem faces in developing an accurate means of assessing these investment plans. He suggests that in addition to offering pure incentives to cut costs, Ofgem must also find new ways to encourage expenditure on investment.
