Assessment of regulatory risk in the finnish electricity distribution business

Abstract

Regulation of electricity distribution business in Finland has redefined the profitability of the business by regulating the allowed rate of return. The principal regulation regime has remained the same, but the added incentive schemes have changed the level of risk that companies are exposed to. Typically the risk is realized in case of disturbances in electricity supply. The Finnish regulation has also been defined by court rulings that have had an effect on regulation parameters. In this paper the study on changing risk level for Finnish distribution companies is done using case examples as well as based on theoretical discussion. The accumulating experience from regulation will give some indication on the future development of risk exposure stemming from regulation.