FEATURE - CEER has benchmarked the cost-efficiency of Europe’s electricity and gas TSOs.
CEER has published the results of its pan-European cost-efficiency benchmarking of Europe’s Electricity and Gas Transmission System Operators (TSOs). This extensive benchmarking exercise was carried out by CEER and its consultant Sumiscid.
International cost efficiency benchmarking of TSOs is a very powerful tool in the regulatory toolkit in many regulated sectors worldwide. It helps deal with the information asymmetry between a TSO and the national regulator. It helps regulators incentivise monopoly network operators by assessing their performance.
What’s so different about this benchmarking exercise?
CEER had previously completed four electricity TSO cost efficiency benchmarks and one for gas TSOs. This is the first time that CEER has benchmarked gas and electricity TSOs in a single project, involving in total 46 TSOs from 16 countries. The project is by far our most ambitious regulatory benchmarking project so far, mobilising regulators, TSOs and a consultant in a joint effort to develop a robust and comprehensive model and data.
Separate reports on CEER’s findings are published for electricity and gas TSOs, along with accompanying Annexes of the TSO asset reporting guides.
Electricity TSOs were found to have a mean cost efficiency of 89.8% for 2017 (with four frontier outlier operators and four best-practice peers).
The gas TSOs had a mean cost efficiency of 79% for 2017 (with six frontier outlier operators and four best-practice peers).
The model used confirms earlier findings both in terms of level and distribution of scores, meaning that there likely is an efficiency potential corresponding to about 10% of total comparable expenditure. The result corrects for salary differences, heterogenous opening balances, unequal length of investment streams and overhead cost allocation rules.
CEER intends to benchmark TSOs every three years. Hence, the next benchmark will start in 2021.