1. Incentives Schemes for regulating DSOs, including for innovation Consultation Paper

2. Agenda
Context
Motivation
Scope
Main expected results

3. Context What are DSO incentive schemes?
For NRAs, setting incentive schemes:
Frames DSO behaviour and decisions to achieve regulatory aims for the benefit of the customer, simulating a competitive environment
For DSOs, incentive schemes provide economic signals that:
Lead them to strive for specific outcomes in return for the allowed revenues recovered through tariffs
For customers, incentive schemes provide benefits by:
Ensuring the value for money they pay through tariffs
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4. In the customer interest:
Context
Customer interests are at the centre of regulatory incentives design:
Incentive schemes provide signals to DSOs, whereas signals to customers are given by tariff structures
In the customer interest:
Balancing short and long term perspective and different regulatory aims
Incentive A B
Incentive C
Focus of this work: incentive schemes for DSO behaviour and outcomes
Motivation: consumer interests and ensuring best outcomes for the system
Incentive schemes provide signals to DSOs, while signals to consumers are given by tariff structures
Incentives schemes for DSOs try to simulate a competitive environment

5. Context
Previous reflections have launched the debate around regulatory incentives for DSOs:
2014, "Bridge to 2025 Conclusions Paper“
2015, “Future role of DSOs”
2016, EU “Clean Energy for All Europeans Package” proposal
2014, "Bridge to 2025 Conclusions Paper“:
Acknowledged that energy systems have been impacted by “significant structural and market developments which have altered the characteristics of electricity and natural gas distribution activities”.
“CEER will develop guidelines for good practice for incentive schemes”.
2015, “Future role of DSOs”:
Public consultation that addressed (but not focused on) incentive schemes for innovation.
Some concerns has been raised about the conjunction of the promotion innovation and other regulatory aims
“CEER will consider the need for further guidance in any of these areas”.
2016, EU “Clean Energy for All Europeans Package” proposal:
European Commission also recognizes the changing role of DSOs in a context of structural changes in the market, that may raise the need for new regulatory solutions

6. Guidelines of Good Practice
Motivation
New challenges for NRAs in defining effective regulatory models may trigger need for changes in regulatory aims and tools (incentives)
Changing world
New challenges for DSOs have emerged
Traditional concerns
Some traditional aims remain fundamental regulatory concerns
Shared perspective
Need for NRAs and stakeholders to share perspectives
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Guidelines of Good Practice
Develop Guidelines of Good Practice for designing incentives, applicable to different realities

7. Scope CEER Consultation paper examines:
Current principles and regulatory approaches
Changing needs
Changing aims and approaches:
balancing of choices
innovation
whole system approach
These issues will be addressed by my colleagues during the various sessions.

8. Principles of DSO regulation
Scope
Common regulatory principles that underpin CEER’s work:
Principles of DSO regulation
Level-playing field
Cost efficiency
Financial viability
Quality of service
Innovation
Security of supply
Holistic view
However:
Specific context facing each NRA will determine the relative weight of each principle

9. Current aims New aims Main expected results
CEER Guidelines of Good Practice will support NRAs in balancing new and current aims
Current aims
New aims
By addressing approaches along several vectors, particularly:
Innovation
Whole system approach
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10. Thank you for your attention!