Discussion Papers

Oliver Franz, Marcus Stronzik

Berechnung zum generellen X-Faktor für deutsche Strom- und Gasnetze: Produktivitäts und Inputpreisdifferential

Nr. 277 / Juli 2006

Summary

One of the major points of discussion in the currently ongoing consultations between the German regulatory authority (BNetzA) and the network operators concerning the upcoming incentive regulation in the German energy sector is the determination of the so-called X-factor which describes not only the possibilities of companies to outperform the national average of productivity development (productivity differential) but also the relation between sectoral and national input price developments.

The intention of this study is to contribute to the ongoing consultations by picking up the major topics of discussion and analysing them whilst taking into account the different views of the parties involved. Regarding the productivity differential, one of the major issues of disagreement between BNetzA and the network operators is which time series of the Federal Statistical Office (DESTATIS) should be used as an output proxy. While BNetzA is in favour of data from series no. 4, companies have a strong preference for series no. 18. Having analysed the differences of these two, the net production value or the gross value added of series no. 4 seems to be more suitable to measure the productivity performance of the energy sector.

Moreover, the network operators argue that the year 1996 should not be considered for calculation as the so-called coal penny (Kohlepfennig) was a special subsidy for German coal industry which was financed by a levy on the electricity price. The abolishment of the coal penny leads to an overestimation of the actual performance of network operators in 1996 due to the fact that the levy is contained in the deflator but not in the output measure. However, this effect to the disadvantage of the operators is at least partly compensated by stepwise increases of the levy before 1996.

Another point of disagreement is the weighting of the two considered time periods. The calculations of BNetzA are based on the interval 1977 to 1997. For statistical reasons the overall period is split up into two sub-periods, both of different length. Nonetheless, both periods are allocated the same weight which is criticised by companies. Within this context the application of a stretch factor - taking into account the initial effect of incentive-based regulations on productivity - is also discussed controversially. International experience gives a lot of evidence for this productivity spike at the beginning of such a regime. Therefore, at least in the first regulation period, a stretch factor is worth thinking of in order to keep the balance between network operators and customers (allocative efficiency).

Regarding the input price differential, the calculations of BNetzA are based on indices of a private company (WIBERA) which is problematic for reasons of transparency. On the other hand, publicly available data from DESTATIS is insufficient for the considered time period. However, input price indices with a sufficient level of detail in order to construct a meaningful indicator for the energy sector are available from 1995 on. [Full text available in German only]

Diskussion Paper is available for download.

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