International Experiences with Using TFP Benchmarking in Energy Industries Regulation

The TFP approach (TFP method) is one of the methods of performance-based regulation whose aim is to increase the efficiency of regulated companies. This article presents an overview of current international experience with the application of TFP benchmarking in the price regulation of energy industries. The TFP approach in regulated tariff setting has been used mainly in Anglo-Saxon countries. The method has been used mainly as an underlying method to price decisions. Further, we may state that TFP analysis is an area in which regulatory agencies often rely on external consulting companies, and that for a successful adopting of TFP methodology, a broader social consensus is needed. Data issues seem to be a general obstacle when implementing this method. The international experiences suggest that even a complex method of price regulation where TFP plays only an underlying role may be successful.