BENCHMARKING REGULATION IN DEVELOPING ECONOMIES: BRAZIL’S SECOND CYCLE OF PERIODIC PRICE REVIEWS OF THE ELECTRICITY DISTRIBUTION UTILITIES (2007 -2010)

摘要

The first cycle of periodic price reviews of electricity distribution utilities comprised the period from 2003 to 2006. The second cycle started in March 2007 and will be extended up to 2010. The periodic price reviews are part of the regulation model used by ANEEL (The Brazilian National Agency of Electric Energy). The model brings together the incentive regulation approach (price cap) and benchmarking practices to establish “efficient’ operational expenses of the regulated utilities using a “shadow” or reference firm. The “shadow” firm approach is seen as one of the most complex and controversial issues in the regulation process in Brazil. rnThe analysis of the results of the first cycle concluded that the use of the reference firm would promote the short-term efficiency of the regulated firms but would not promote their long-term technological improvement and updating. rnThe regulation Agency started the second cycle having concluded until December 2007 the price reviews of seven major distribution utilities that supply more than 400 thousand consumer units. The general objective of the paper is to evaluate the influence of the economic regulation upon the distribution utilities. Its specific purpose is to evaluate the impact of the use of the “reference firm” operational expenses upon the attainment of the strategic goals of the regulated firms. According to ANEEL the “reference firm” is a model firm with which the actual utility would compete having as incentive to operate with operational costs below the standards recognized by the “reference firm” itself.