NMa Energiekamer (2010-2011) Trends in productivity growth and input prices

Following the decision of the College van Beroep on 29 June 2010 (in Dutch), Energiekamer faced the task of establishing a method of regulation for the Dutch gas transmission operator (GTS) from 2006. This was necessary to re-establish the continuous system of regulation over GTS. One element of Energiekamer's price controls is an X factor, which partly determines how tariffs evolve over a regulatory period. The X factor represents an element of expected productivity growth.

Reckon produced a report for Energiekamer containing analysis that might inform the decision regarding the levels of future expenditure to be reflected in price limits for GTS. The report covered two potential methods for applying efficiency assumptions to obtain future expenditure levels, referred to in the report as Y and Z.

We carried out analyses of growth rates in output price indices, productivity measures and unit cost measures for different sectors of the Dutch economy using the EU KLEMS dataset. We reviewed a number of studies relating to productivity and unit cost trends for gas transportation companies. We carried out analyses of changes over time in operating expenditure per unit of output using data for gas transportation companies in the Netherlands, US, UK and Australia. We also examined decisions made by regulators in a number of European countries, insofar as these concern annual adjustment factors that share similarities with Y and Z.

The report (PDF, 130 pages) was published alongside the NMa's draft proposals.

*Nicholas Francis

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Reckon LLP is an economics consultancy with expertise in data analysis, economic regulation and competition law.