The pan-European Transmission Cost Benchmarking Project (TCB18) is an international comparison of electricity and gas transmission system operators’ (TSOs’) cost efficiency. Oxera’s review, undertaken on behalf of the participating European TSOs, identified several areas of the study that will benefit from additional work. In the spirit of strengthening such initiatives in the future, our review provided recommendations on procedural and methodological aspects of the study. While specific to TCB18, many of these recommendations have important implications for national and international efficiency analysis.

TCB18 was carried out by the Council of European Energy Regulators (CEER) and its consultant (Sumicsid), and represents a follow-up to previous studies such as ECOM+, e3grid2012 and e3grid2008. TCB18 is aimed at providing a platform to undertake periodic cost-efficiency assessment of European electricity and gas TSOs.

A consortium of all the electricity TSOs that participated in TCB18 (electricity) asked Oxera to validate and review the results from the study. Separately, a number of European gas TSOs asked us to review the corresponding gas study.

Our review identified detailed avenues for improvement with respect to (i) data collection, construction and normalisation; (ii) model development; (iii) application of efficiency analysis and validation of results; and (iv) transparency. We also provided 15 recommendations on procedural and methodological aspects of the two studies and improvements for future initiatives of CEER.

Dr Srini Parthasarathy noted that:

‘International benchmarking can be a powerful tool for companies, regulators and policymakers to assess the efficiency of network operators. This is especially true in the context of the transmission sector, where national benchmarking is often challenging. In this context, we welcome projects such as TCB18, which have attempted to develop a framework for periodic assessment of TSOs. Nevertheless, the TCB18 study itself suffers from a number of significant issues. We hope that the recommendations presented in our report are helpful for CEER in developing a process and methodology for international cost benchmarking that is more robust. We intend to disseminate the findings of the study among key European energy market stakeholders.’

Our report is available here.

Contact:

Fiamma Mazzocchi Alemanni
Strategic Communications Manager