ECA SERVICES / ECONOMIC REGULATION
Regulation provides a vital framework for our energy and water businesses to operate and compete in a manner that maximises welfare, encourages innovation, and protects customers. The unique nature of networked utilities, leading to natural monopolies in essential services, makes informed, robust and transparent decision-making critical to effective governance. ECA specialises in supporting governments, regulators and regulated entities in the economic regulation of the energy and water networks by applying our experience and leading-edge knowledge to revenue setting methodologies, tariff design and regulatory procedures.
We advise on the regulation of markets including market and sector restructuring, market monitoring, market rules and network access conditions. In markets with low electrification rates, ECA supports the development of regulatory frameworks and analyses business models targeting the provision of infrastructure to rural areas.
Our focus areas include:
- Providing ongoing support to utility regulators in price controls
- Calculating cost of service and allowed revenues
- Designing energy and water tariffs
- Assessing cost of capital and utility funding requirements
- Regulating prosumers and offgrid networks
SELECTED PROJECTS INCLUDE >
SELECTED PROJECTS INCLUDE >
GB-Europe gas interconnector regulation
ECA modelled the Dutch, Belgian and GB gas markets to assess the extent to which the gas interconnectors, IUK and BBL will be able to exercise market power when their current long-term contracts come to an end.
Implementation of EU network codes, Ireland
Under the European Union’s Third Energy package Member States are obliged to implement a set of EU Network Codes and ensure compliance by TSOs, DSOs and industry. This framework contract provided expert support to the electricity market regulator (CRU) in the implementation of six of the eight Network Codes in the wider context of the restructuring of Ireland’s electricity markets, with the introduction of the Integrated Single Electricity Market (I-SEM) to align with the EU target Model.
Gas TSO allowed revenues, EU
This study documented and contrasted the methodologies used by regulatory authorities across the EU in determining and setting the allowed or target revenues of gas transmission companies. It also assessed whether specific approaches are suited to particular circumstances and if there was scope for greater harmonisation to facilitate the development of an integrated EU gas market.
Water company cost of capital analysis, UK
ECA was contracted to advise the Consumer Council for Water on the appropriate cost of capital for the water companies in the 5-year regulatory period of Ofwat’s price review. ECA’s analysis focused on the weighted average cost of capital (WACC) and the recent financial performance of the companies.
Tariff study and market rules support, Cyprus
ECA was appointed by the Electricity Authority of Cyprus (EAC) to assist with the development of new tariff designs consistent with a recently issued tariff methodology by the regulator. ECA is also providing advice on the new market rules for Cyprus (which is moving to a net pool market model) and bilateral contracting in a competitive market.
Regulatory support in price review of gas facilities in Malaysia
After successfully assisting Malaysia’s Energy Commission, Suruhanjaya Tenaga, to develop the guidelines required for the determination of gas facilities tariff under an Incentive-Based Regulation (IBR) Framework, ECA was contracted to assist in facilitating the submissions of licensees and preparing the responses as part of the first regulatory period which will determine the allowed tariff for the utilisation of gas facilities.
Regulatory modelling for network business, Australia
Jemena Networks needed assistance modelling its regulatory asset base based on new reporting requirements set by the Australian Energy Regulatory. ECA developed a new model that allocated the existing regulatory asset based among new benchmarking asset categories, using estimates of depreciated replacement cost.
Electricity network pricing, Greece
ECA was appointed by the Regulatory Authority for Energy (RAE) to develop transmission connection and use-of-system tariffs for electricity for implementation by the transmission and distribution network operators.
Mini-grid regulatory framework development, Kenya
ECA, in association with engineering firm Trama TecnoAmbiental, worked with the Ministry of Energy and Petroleum and other sector stakeholders to consolidate and develop a comprehensive policy and regulatory framework for mini-grid development in Kenya. This included analysis of business models, tariffs and financing (and the requirement for subsidies), technical guidelines, legal requirements and procurement.
Electricity tariff design, Jamaica
ECA was contracted by Office of Utilities Regulation (OUR) in Jamaica to provide expert advice on tariff designs for the electricity sector.
Performance based incentive mechanisms for network operators in Montenegro
Following the conclusion of a previous assignment providing recommendations and training on performance-based incentive (PBI) regulation for network operators, ECA provided further assistance to the Energy Regulatory Agency of Montenegro in implementation of PBI mechanisms. The work focused on a review of key reliability metrics, including SAIDI and SAIFI for distribution and ENS and AIT for transmission.
Retail electricity tariffs, Nigeria
ECA developed marginal-cost based tariff structures and recommended staged tariff increases, automatic adjustment mechanisms and lifeline tariffs.
Electricity tariff and market advisor, Kosovo
Under a long term USAID programme ECA advised on tariff setting and in developing a unified market with Albania including common market and balancing for wholesale electricity. Advice included, licensing issues, market design, operational protocols and legislative changes, power exchange development, wholesale contracting and renewables contracting and price regulation.
Water tariff review and affordability study, Uganda
This assignment involved ECA advising on a new tariff policy and structure, undertaking a comprehensive willingness and affordability to pay survey, detailed cost-recovery and tariff modelling and the design of an effective subsidy policy.
Gas transmission and distribution regulation, Israel
This project helped the Natural Gas Authority to regulate and develop the transmission and distribution of natural gas in Israel.
Advisory services to Electricity Regulatory Agency of Vietnam
ECA provided advisory services to the Electricity Regulatory Agency of Vietnam (ERAV) on the implementation of power market reforms in accordance with the Government’s roadmap for the sector.
Wastewater to resource policy and regulation
ECA was engaged by the World Bank to conduct a study on how policy, institutions, regulation, and financing mechanisms can be designed to incentivise wastewater reuse and resource recovery.