Incentive based distribution network performance enhancement

Electricity networks restructure is already underway in many countries around the world. One of the major objectives of electricity distribution networks restructure is to enhance the efficiency of distribution utilities. Since distribution businesses is a natural monopoly, the only way to enhance distribution utilities performance is via the introduction of artificial competition among participating entities. Artificial competition requires a performance assessment mechanism that is transparent and acceptable by all involved parties. This performance assessment tool itself is only functional if linked to incentives and penalties scheme. This paper is dedicated to show the Agency efforts for distribution networks performance assessment of the Egyptian electricity distribution business. The paper provides a summary of the Agency experience in the establishment of a functional benchmarking tool under current circumstances. It presents the challenge to link this tool to an incentives/penalties policy given that the Agency does not have the power to set tariffs or to levy fines. One proposal is to establish an incentives fund. However, financing such a fund is a challenge. Transparency is the only available method for the Agency for the present time.