Investment and revenue cap under incentive regulation: The case study of the Norwegian electricity distributors

Figures & data

Table 1. Data summary

Year	Revenue cap (RC)	Investment (IN)		Reinvestment	Depreciation
		Total	New investment
1997	3,968,382	808,977			553,411
1998	4,376,344	928,209			620,042
1999	4,714,314	721,107			654,640
2000	4,610,708	782,992			684,324
2001	5,102,221	646,662			698,172
1997–2001	4,554,394	777,589			642,118
2002	5,497,387	957,121	728,851	228,270	728,663
2003	5,889,131	795,656	615,149	180,507	746,498
2004	5,785,126	905,662	618,054	287,608	773,961
2005	5,734,775	1,166,573	881,494	285,079	796,439
2006	6,123,949	833,626	651,902	181,724	835,936
2002–2006	5,806,074	931,728	699,090	232,638	776,299
2007	5,915,091	990,946	703,178	287,768	860,632
2008	6,116,288	1,069,608	704,781	364,827	890,621
2009	6,231,084	1,153,786	719,181	434,605	925,704
2010	8,136,988	1,188,438	788,120	400,318	958,907
2011	7,844,918	1,484,051	866,774	617,277	1,074,185
2012	7,256,583	1,864,003	1,173,524	690,479	1,109,999
2007–2012	6,916,825	1,291,805	825,926	465,879	970,008

Note: Unit: 1000 Norwegian kroner.

Table 2. Estimated coefficients and common factors of the panel model

	Model 1 (Two-way)	Model 2 (Individual effect)	Model 3 (Time effect)	Model 4 (Base)
Constant	7,520^* [167]	7,200^* [184]	2,760^* [222]	1,700^* [217]
Revenue cap (RC)	0.0598^* [0.0126]	0.0648^* [0.0116]	0.133^* [0.0045]	0.149^* [0.0036]
Number of factors	4	4	4	4
Share out of total variance
Factor 1	40.75	40.09	42.00	40.22
Factor 2	25.69	26.15	26.14	26.1
Factor 3	18.75	18.82	17.03	18.51
Factor 4	14.81	14.94	14.83	15.18
R^2 value	0.93	0.933	0.921	0.917

Note: Values in square bracket are standard error.

* denotes significance at the 0.01 level.

Figure 1. The estimated first time-varying common factors of the four panel models.

Table 3. The cross-section dependence (CD) test results

	Whole sample	1997–2001	2002–2006	2007–2012
Total investment vs. Revenue cap
statistic value	52.3	26.1	31.4	38.4
p-value	< 0.01	< 0.01	< 0.01	< 0.01
New investment vs. Revenue cap
statistic value	38.0		66.0	18.5
p-value	<0.01		<0.01	<0.01
Reinvestment vs. Revenue cap
statistic value	41.7		36.5	56.7
p-value	<0.01		<0.01	<0.01
Critical value	2.56	2.56	2.56	2.56