Leading up to 2013, Réseau de Transport d’Électricité (RTE), a French transmission operator (TSO), was the largest TSO in Europe’s electricity network. Like all European TSOs, RTE was subject to regulatory regimes. At the end of 2013, RTE was operating under a revenue cap, which required that it seek the regulator’s approval before making capital investments. The company was poised to undertake an ambitious investment program in 2014 to replace aging assets. However, the potential for regulatory changes, the need for the regulator’s approval, and the long depreciation life of the assets made planning difficult. RTE needed to develop a financial planning model that would help it decide whether to make the investment and how to prepare for possible regulatory uncertainties.
In 2014, Eandis System Operator CVBA (Eandis), a low- and medium-voltage power distribution system operator (DSO) in Belgium, had an ambitious plan for investing in a smart metering infrastructure, but the regulatory context was uncertain. The company had been operating in a regulated monopoly characterized by a cost-plus pricing regime. The regime allowed the company to recover its costs through the tariffs it charged grid users for access to the electricity distribution network. In recent years, the regime had motivated the company to invest in infrastructure; however, the cost-plus regime was about to be replaced by a new type of regulation based on incentives and the DSO’s performance. Under the new regulation, DSOs could propose investments to the regulator, who then approved the investments based on a cost-benefit analysis. In this context, Eandis must decide whether to continue with its plan to invest in smart metering and, if so, how to structure the investment to appeal to the equity investors.
In 2014, Eandis System Operator CVBA (Eandis), a low- and medium-voltage power distribution system operator (DSO) in Belgium, had an ambitious plan for investing in a smart metering infrastructure, but the regulatory context was uncertain. The company had been operating in a regulated monopoly characterized by a cost-plus pricing regime. The regime allowed the company to recover its costs through the tariffs it charged grid users for access to the electricity distribution network. In recent years, the regime had motivated the company to invest in infrastructure; however, the cost-plus regime was about to be replaced by a new type of regulation based on incentives and the DSO's performance. Under the new regulation, DSOs could propose investments to the regulator, who then approved the investments based on a cost-benefit analysis. In this context, Eandis must decide whether to continue with its plan to invest in smart metering and, if so, how to structure the investment to appeal to the equity investors.