Learning from experiences of the prior Swedish electrical distribution system regulation — Reference material when developing the future regulatory incentives

The electric power system is under an extensive development phase. This change is today normally expressed in the concept of Smart Grid. It captures different developments for a sustainable electric power system, e.g. including large changes at the electrical distribution level with new features for electricity customers. One move in these changes is the larger role of the regulator. In Sweden, a performance based regulatory model was introduced in 2003 as a tool to support in judging if the distribution system operators (DSOs) was charging the customers the right level of tariffs. The model was referred to as the Network Performance Assessment Model (NPAM). The NPAM was an international unique and innovative regulatory tool. The model evaluated tariffs by enter several system data to a computer program which produce a fictive network with the aim of having the same objective conditions as the real system. However, the NPAM was strongly criticized and since 2009 formally abandoned and a new regulation will be introduced 2012. Moreover, the NPAM not support climate incentives such as low losses, which will be a challenge when adopting a smart grid perspective into the regulation of distribution system tariffs in the future. The authors of this paper have followed the development of this model, and have a unique insight in the complexity behind the model. No stringent description of the NPAM is available. This paper aims to fill this gap by providing an overall picture of the NPAM including hitherto unpublished details on underlying theory. This could hopefully inspire and give a reference when developing regulations in different countries in the future by learning from its novelties as well as from its drawbacks.