The network performance assessment model

Abstract: The electricity distribution in Sweden is experiencing aconsiderable change in conditions by the radical change inregulation policy. The Swedish Energy Agency(Energimyndigheten) is introducing a new regulatory model, theNetwork Performance Assessment Model, as the main tool forsupervising the natural monopolies of local electricitydistribution. The new model has interesting and far-reachingconsequences for the involved parties.This thesis investigates the implications of the newregulation and the regulatory tool, in particularly related toIT-investments evaluations in the distribution utilities. Intoday’s utilities, IT-systems are often a vital part ofoperations, ranging from e.g. real-time monitoring andcontrolling of the network to various administrative tasks.Considerable amounts of money are spent on investments toenhance and maintain these IT-systems. The changed regulationand the new regulatory model put a focus, more than ever, onefficient use of utilities’resources, implying a need forsuitable methods to evaluate ITinvestments.In the thesis, the new regulation is described, inparticular the new regulatory model. The model is presented andcentral implications are identified, e.g. in terms of newrequirements put on the utilities and general businessconsequences. As stated, the focus is on implications relatedto IT-systems and investments in these systems.Furthermore, a wide range of IT-investment evaluationmethods are presented and categorized in the thesis, focusingon IT-investment appraisal techniques. The categories rangesfrom methods only considering cash flows of investments to moreelaborate methods, e.g. for considering behavioral sciencesaspects. The thesis outlines and presents categories of methodsas well as examples of individual methods.In the final part of the thesis, suitable IT-investmentevaluation methods, given the implications of the newregulation, are discussed. The implications include both directbusiness related aspects as well as more technical issuesrelated to the IT-investments. It is also concluded that asuitable method need to incorporate both monetary consequencesof the investment as well as a limited number of non-monetary,related to the regulatory model.Key words:Regulation of electricity distribution,IT-investment evaluation methods, Implications of monopolyregulation