European Union and Norway

The Challenge

The Agency for the Cooperation of Energy Regulators (ACER) wanted to extend its analysis on retail energy markets to inform the annual Market Monitoring Report (MMR). The MMR examines the progress of Member States towards the objectives of a target internal energy market. IPA was commissioned by ACER to develop a Composite Index (CI) to rank the relative competitiveness of retail energy markets using public sources of data.

Our Solution

To achieve this IPA:

  • Reviewed relevant literature to identify potential indicators of competition in retail energy markets and enhance understanding of methodologies to develop a CI of competitiveness using these indicators.
  • Created a long-list of indicators and a framework to evaluate quality and relevance. This informed the final list of indicators which were discussed and agreed with ACER, the Council of European Energy Regulators (CEER) and representatives of the National Regulatory Authorities (NRAs).
  • Developed a methodology to combine the agreed indicators, and discussed it at a Workshop in Brussels with ACER, CEER and the NRAs. This included assessing the completeness of the data underlying the indicators and how gaps would be filled; analysing data series for outliers and relationships between them; data normalisation to ensure common units of measurement; using expert judgement to weight the indicators; aggregating the indicators; and ascertaining the robustness of results, such as Monte Carlo analyses.

Presented the methodology in a Final Report published alongside the MMR. The Report was accompanied by a fully-documented spreadsheet-based tool to enable ACER to continue to review and update the composite indicator.