Selecting a Benchmarking Model Creates Need for an Error Margin, Says Dutch Court

Wed Feb 01 13:41:49 EST 2017
By Tomas Haug

NERA’s Energy Regulation Insights (ERI) newsletter explores the economics behind topical developments in energy sector regulation.

In this edition of ERI, NERA Director Tomas Haug discusses a significant court decision from the Netherlands, which provides further indication that international benchmarking models are of little use in a regulatory context. Attempts to adapt the managerial technique of statistical benchmarking to regulatory purposes have frequently run into problems.

Although the court decision applies only in the Netherlands, it is sufficiently general to affect the practice of benchmarking in other jurisdictions. It certainly gives regulators everywhere reason to reconsider the value of regulatory benchmarking and to look at other, more objective ways of setting targets for cost reduction.