Tariff Regulation and Profitability of Energy Networks : A Model Analysis for TenneT TSO

In this paper the author analyses the impact of the regulatory framework for the new regulatory period (2011-2013) on the long-term profitability of TenneT TSO, the operator of the high-voltage electricity network in the Netherlands. Long-term profitability is a key component of the fiance ability of a firm. In the long run, the return on capital should be at least equal to the opportunity costs of capital in order to finance investments. As the ultimate indicator for the long-term profitability, author uses the net present value of economic profit, which is the difference between total revenues and total costs, including a normal return on capital. In order to simulate the future financial development of the TSO, a model is developed. Results of the analysis of this model are descriped in this paper