Network revenue model

Grid companies' revenues are determined by the Norwegian Energy Regulatory Authority (RME). In 2023, the combined revenue caps totaled almost 45 billion NOK. The grid companies' revenue caps are affected by, among other things, the grid company's investments, developments in the industry, structural changes and changes in regulations.  

What factors affect the grid operator’s revenue cap?    

We make financial calculations for grid companies and investors by projecting grid companies’ revenue cap, efficiency and financial performance, and to analyse the consequences of structural, cost and regulatory changes. Typical projects where revenue cap forecasts are used are valuations of grid operations, development of long-term budgets, merger processes, investment decisions or potential regulatory changes.

THEMA’s revenue cap tool is a flexible model that we update and maintain regularly. The model replicates the notified revenue cap for the year and projects the revenue cap for all DSOs for each year 10 years ahead.

How is the revenue cap affected by various changes?

Our own analyses of developments in the industry form the basis for the revenue cap forecasts. Projections can be made under different assumptions for costs, investments, mergers, or regulatory parameters such as calibration basis, grid loss price, NVE interest rate, etc. All steps in RME’s regulation are included in the model, i.e. DEA benchmarking, framework conditions regression, calibrated DEA result and total revenue cap.

We calibrate our model against RME in terms of actual revenue cap calculations and more complex issues such as loss of revenue and the harmonising effect of mergers. THEMA closely monitors potential changes to the regulatory model, develops the model and makes assessments of the consequences for the grid companies’ revenue cap. As part of the model development, we have regular dialogue and discussions with RME to clarify questions related to data and interpretation of the regulatory model, and this ensures that the results are calibrated and consistent with current regulation and industry developments.

Forecasts for future revenue caps

We provide a wide range of services and analyses based on revenue cap forecasts. The forecasts are used for valuation of grid companies, as a basis for long-term budgets, analyses of grid company mergers and assessments of the consequences of changes in revenue cap regulation. We can deliver various reports as required, transaction support in Excel format and workshops on revenue cap regulation.

In collaboration with Straumr, we have developed a user-friendly, flexible and robust forecasting tool that gives DSOs increased insight into future revenue caps.

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