Conditional yardstick competition

The purpose of this report is to elaborate and summarize the numerous insights gained and lessons learned during eight years of collaboration with the Finnish Energy Authority to design better incentive regulation for local monopolies in the electricity distribution sector. While my work has mainly focused on benchmarking, I always wanted to thoroughly understand how benchmarking influences the overall incentive mechanism of the revenue cap, and more broadly, how the regulation of local monopolies fits with deregulation of the energy sector in Europe. While energy generation receives much more media attention than the electricity grid, I hope that this report helps to convince the reader that the regulation of local monopolies in the distribution sector is a very interesting area for an economist, which can also provide valuable insights to other sectors.