Finnish perspectives on the business of electricity distribution

Abstract

The profits of the Finnish industry of electricity distribution are driven by a rate of return regulation model. Changes in the model caused a remarkable jump in DSO profits. The model rewards large costs and gives the DSOs an incentive to build an extremely weatherproof network, to over-invest. Allowed exceptions to lower costs of network construction may not be fully utilized. Risks connected to demographic changes may influence the forecasted network investment profitability. The emergence of energy communities may also affect the DSOs. There may be differences between public and private DSOs´ financial behavior. The ability of stakeholders to affect regulatory decisions is asymmetric.