TY - JOUR

T1 - Incentive Regulation and Utility Benchmarking for Electricity Network Security

AU - Nepal, Rabindra

AU - Jamasb, Tooraj

PY - 2015

Y1 - 2015

N2 - The incentive regulation of costs related to physical and cyber security in electricity networks is an important but relatively unexplored and ambiguous issue. These costs can be part of cost efficiency benchmarking or, alternatively, dealt with separately. This paper discusses the issues and proposes options for incorporating network security costs within incentive regulation in a benchmarking framework. The relevant concerns and limitations associated with the accounting and classification of network security costs, choice of cost drivers, data adequacy and quality and the relevant benchmarking methodologies are discussed. The analysis suggests that the present regulatory treatment of network security costs using benchmarking is limited to being an informative regulatory tool rather than being deterministic. We discuss how alternative approaches outside the benchmarking framework, such as the use of stochastic cost-benefit analysis and cost-effectiveness analysis of network security investments can complement the results obtained from benchmarking.

AB - The incentive regulation of costs related to physical and cyber security in electricity networks is an important but relatively unexplored and ambiguous issue. These costs can be part of cost efficiency benchmarking or, alternatively, dealt with separately. This paper discusses the issues and proposes options for incorporating network security costs within incentive regulation in a benchmarking framework. The relevant concerns and limitations associated with the accounting and classification of network security costs, choice of cost drivers, data adequacy and quality and the relevant benchmarking methodologies are discussed. The analysis suggests that the present regulatory treatment of network security costs using benchmarking is limited to being an informative regulatory tool rather than being deterministic. We discuss how alternative approaches outside the benchmarking framework, such as the use of stochastic cost-benefit analysis and cost-effectiveness analysis of network security investments can complement the results obtained from benchmarking.

KW - Benchmarking

KW - Network security

KW - Incentive regulation

KW - Exceptional events

KW - Benchmarking

KW - Network security

KW - Incentive regulation

KW - Exceptional events

UR - https://sfx-45cbs.hosted.exlibrisgroup.com/45cbs?url_ver=Z39.88-2004&url_ctx_fmt=info:ofi/fmt:kev:mtx:ctx&ctx_enc=info:ofi/enc:UTF-8&ctx_ver=Z39.88-2004&rfr_id=info:sid/sfxit.com:azlist&sfx.ignore_date_threshold=1&rft.object_id=110975506070117&rft.object_portfolio_id=&svc.holdings=yes&svc.fulltext=yes

U2 - 10.1016/j.eap.2015.11.001

DO - 10.1016/j.eap.2015.11.001

M3 - Journal article

AN - SCOPUS:84949239203

VL - 48

SP - 117

EP - 127

JO - Economic Analysis and Policy

JF - Economic Analysis and Policy

SN - 0313-5926

IS - December

ER -