Ex post efficiency test for gas distribution expenditure

Ofgem consultation (77 pages, PDF) on gas distribution price controls from 2007. There are also some appendices (PDF). The paper notes a likely overspend in the 2003-2007 period, and proposes to apply an ex post efficiency test as part of a capex rolling incentive mechanism that distinguishes between "wasteful and unnecessary" overspends and "efficient" overspends, with the latter being passed through to the regulatory capital value after a five-year lag. Ofgem also promises to "giving full recovery to efficient overspends that provide significant benefits to consumers", a category which apparently includes overspends caused by unanticipated legislation. Responses by Tuesday 29 August 2006.

For further information or advice please contact Franck Latrémolière.

Filed under Ofgem, Price controls.

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