Presentation of economic analysis on the right regulatory signals to be implemented for efficient investments and energy loss reduction in electricity networks. Overview of Regulatory Models in Europe Analysis of Regulatory Schemes in Selected Countries : Great Britain, Germany, the Netherlands, Norway and Spain Analysis of Incentives for Efficient Investments Case Study on Distribution Losses (Spain) Conclusions and Recommendations

1. Regulatory Incentives for Investments in Electric Networks A presentation to European Copper Institute Dr. Konstantin Petrov / Rosaria Nunes May 2009

2. Table of Contents 5. Analysis of Regulatory Incentives on Losses - Spain 3. Regulatory Practice - Examples 1. Rationale for Regulation 4. Case Study on Distribution Losses 6. Conclusions 2. Regulatory Models

11. Regulatory Practice – Selected Examples Included in the allowed revenue (incentives on physical volumes via the benchmarking) Network Operators Allowed revenue reset annually Yardstick regulation Norway Included in the allowed revenue Network Operators 4 years /transm. 5 years /distr. Yardstick regulation The Netherlands Explicit loss adjustment term with an allowed target level Suppliers 4 years Revenue cap Spain Explicit loss adjustment term with an allowed target level Suppliers 5 years Revenue cap UK Included in the allowed revenue (but not in the current benchmarking exercise) Network Operators 5 years Revenue cap Germany Treatment of Network Losses Procurement Network Losses Regulatory Period Type of Regulation Country

23. Dr. Konstantin Petrov KEMA Consulting GmbH Kurt-Schumacher-Str. 8 53113 Bonn / Germany Phone: +49 228 4469058 Fax: +49 228 4469099 Mobile: +49 173 5151946 e-Mail: [email_address]