Abstract
This paper describes the use of so called norm costs in the new distribution system income cap regime to be launched in Norway from January 1st 2007. The norm cost should in principle represent the efficient cost level (market price) for providing the distribution network services in a given area. The Norwegian regulator (NVE) has decided to establish norm costs using DEA benchmarking.
The DEA approach has some significant drawbacks which has been the motivation for developing an alternative task oriented model. In the proposed alternative model the Distribution Network Operator (DNO) norm cost is divided into five partial norm cost elements. The paper presents how these partial norm cost elements can be established and discusses advantages and drawbacks compared to establishment through DEA benchmarking.
The DEA approach has some significant drawbacks which has been the motivation for developing an alternative task oriented model. In the proposed alternative model the Distribution Network Operator (DNO) norm cost is divided into five partial norm cost elements. The paper presents how these partial norm cost elements can be established and discusses advantages and drawbacks compared to establishment through DEA benchmarking.