Regulatory framework and network tariffs to promote market competition, achieve efficient operation, and provide return of new investment costs

Norway deregulated the electricity market through the new Energy Act in 1991. In the period from 1991 until 1997, the network companies were regulated by a rate of return or cost plus model. The regulator put a cap on the rate of return to limit the monopoly profit. In 1997 the regulator introduced a new model to regulate the network companies, based on a maximum total income for the companies. The main objective was to introduce actions to support the overall objectives in the Energy Act of 1991 to have an efficient utilisation of the energy resources in Norway. This paper describes the different aspects of the regulation model in Norway and how it allows the companies to get a return on new investments through the tariffs