Productivity growth and efficiency change in electricity distribution

The decade since privatisation of the UK electricity industry provides an important sample over which to measure productivity growth and efficiency change in electricity distribution. The core idea of incentive based RPIX regulation is to stimulate productivity growth and the convergence of efficiency change amongst the distribution companies. The X factor may represent the regulator’s estimate of the potential for productivity growth, and may also be an instrument for yardstick regulation of these regional distribution monopolies. The expectations generated by the privatisation programme are of large increases in productivity.