Total Cost Efficiency Analysis for Regulatory Purposes: Statement of the Problem and two European Case Studies

This paper describes the issue economic regulators face when assessing the relative performance of network utilities by means of economic benchmarking. Using examples from two European regulatory agencies, we discuss how total expenditure (totex) benchmarking can achieve more consistent outcomes than building-blocks benchmarking, while generating a new set of practical issues which will make this regulatory tool feasible only under a specific set of (mainly country-specific) circumstances.