Discussion of Lorenzo Coppi’s presentation: An economic perspective on compensation Valérie Guigue-Koeppen European Commission – DG COMP

Is the net avoided cost (NAC) methodology likely to result in lower compensation? Not so clear It depends on the counterfactual (scenario without public service obligations) Objective when switching to NAC: better estimate the economic cost of the public service obligation so as to fix the compensation at the right level 2 Well-run Undert. Procurement All advan- tages PSO Undert. PSO Var. Costs PSO Fix Costs Comm. Costs Contr. Reason. Profit PSO Var. Costs Reason. Profit Costs Net avoid cost Cost allocation

Is the reasonable profit likely to be reduced? Draft framework: –rate of return on capital that would be required by a typical company considering whether or not to provide the SGEI (…) taking into account the level of risk –Safe-harbour –Ceiling in the absence of substantial risk 2005 framework: rate of return on own capital that takes account of the risk, or absence of the risk, incurred by the undertaking by virtue of the intervention by the Member State Objectives of providing a safe-harbour and a ceiling in the absence of substantial risk: clarification/simplification

Will efficiency incentives lower compensation in the long term, but may result in compensation above the net costs in the short term? Case of incurred costs lower than expected: efficiency reward time Incurred costs Expected costs Compensation

Is it the role of SA provisions to drive towards more efficient provision of SGEI? Allowing full compensation of incurred costs might affect competition and trade Efficiency means reduction of costs and/or increase of quality -) lower tariffs and/or budgetary burden -) better quality if requested by the public authority -) increased competitiveness and growth Imposing efficiency incentives does not obstruct MS’ margin of discretion when defining the SGEI

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Will efficiency incentives lower compensation in the long term, but may result in compensation above the net costs in the short term? Case of incurred costs higher than expected : efficeincy penalties time Incurred costs Expected costs Compensation