Source - Ei Effektiviseringsincitament Webb (2026-05-12)

Web article by Energimarknadsinspektionen (Ei), published 2026-05-12. Part of Ei’s ongoing project page for the intäktsramar (revenue cap) 2024–2027 regulatory period. Announces further design decisions for the cost efficiency incentive (effektiviseringsincitament) in the forthcoming RP5 (2028–2031) methodology. Builds on the December 2025 announcement that enstegsmetoden had been chosen as the application method.

This source supplements Source - Ei Inriktning intäktsramar 2028-2031 (2025) with three concrete design parameters and identifies what remains open for investigation in spring 2026.

Context: the transition to TOTEX

Ei is developing the current cost-efficiency method (effektiviseringskravet) into a TOTEX solution, where all cost items — both capex and opex — are included in the efficiency benchmarking. This is driven by three goals: (1) providing reasonable cost pressure on individual DSOs; (2) achieving lösningsneutralitet (solution neutrality) so the regulation does not systematically favour grid investment over flexibility procurement; and (3) removing the normvärdelista incentive that rewarded DSOs for keeping acquisition costs low, which disappears under the förmögenhetsbevarande capital valuation principle.

Enstegsmetoden — recap of December 2025 decision

The enstegsmetoden (one-step method) works as follows:

Before the supervisory period, a benchmarking exercise compares companies’ efficiency based on historical data, producing an efficiency percentage for each DSO
This percentage is applied to the company’s actual total cost outturn during the period
The resulting amount adjusts the next period’s revenue frame

The company knows in advance how its revenue frame will be affected as a share of costs, but the absolute amount depends on actual costs incurred. Ei describes this as similar to the current method, with the key difference that DSOs receive cost coverage for actual outcomes in all cost categories — both capital and operating — during the supervisory period.

The three new design decisions

1. No general efficiency requirement

Ei will not introduce a separate general efficiency requirement (generellt effektiviseringskrav) — a blanket annual productivity deduction applied to all DSOs regardless of individual performance.

In some regulatory models, a general efficiency deduction is applied because forecasts of future costs are used as the cost base, and the general deduction accounts for expected industry-wide productivity improvement. In the enstegsmetoden, actual cost outturns (not forecasts) are used. The actual outturn already embeds industry-level productivity development. Applying a general deduction on top of that would penalize all companies by the same amount regardless of how they actually performed.

Ei’s position: if individual incentives are sufficiently effective, they should themselves drive industry-wide productivity improvement. Ei will instead continuously monitor productivity trends in the electricity network sector to verify this holds in practice.

2. Full cost coverage at the third quartile (Q3)

The efficiency benchmark is set at the tredje kvartilen (third quartile): companies at or above Q3 efficiency receive full cost coverage; companies performing better than Q3 receive an increase in their revenue frame; companies below Q3 receive a deduction.

Design rationale and features:

Art. 18 EU Electricity Market Regulation states that network charges “shall reflect the actual costs, to the extent that such costs correspond to those of an efficient and structurally comparable network operator.” This could support full coverage only for the most efficient companies, but Ei considers this too strong an incentive — it would risk short-term cost-cutting at the expense of long-run efficiency and could distort decisions toward what is easily measured and rewarded in the benchmarking model, at the cost of socioeconomically important activities that are harder to measure
Industry-average coverage (the alternative) would mean customers collectively pay for all sector inefficiency — rejected as insufficiently demanding
Relative Q3 threshold (rörlig gräns): the threshold is not fixed at an absolute percentage but moves as the sector improves. This creates a continuous incentive — companies must keep improving even as the industry average rises
Under this design, approximately one quarter of companies will receive full cost coverage or a revenue frame increase
UK precedent: the third quartile is used as the cost efficiency benchmark in the British electricity network regulation

3. Realization time: 8 years retained

The realiseringstid — the period over which identified efficiency potentials are assumed to be realized in practice — remains at 8 years (two supervisory periods of four years each).

Efficiency improvements in grid operations are often tied to long-lived capital assets, limiting the pace of adjustment. The 8-year figure represents a balance between two competing considerations:

For DSOs: they need time to implement both capital-intensive and operational efficiency improvements
For customers: the longer the realization time, the longer customers pay for costs that have already been identified as inefficient

The fact that prior regulation has already applied 8 years, combined with the fact that efficiency will carry greater weight in RP5 than previously, makes retention of the current level appropriate. Ei does not consider shortening the period given the increased role of capex in the TOTEX benchmark.

Open questions — spring 2026 investigation

Two significant design parameters remain under investigation:

1. Adjustments for heterogeneous conditions

For the efficiency incentive to be fair between companies, all costs should be included — but the model should also account for factors outside companies’ control that drive cost differences. Two examples identified:

Electricity prices by bidding area: DSOs in SE1 face different electricity prices than DSOs in SE4, resulting in different network loss costs — costs over which the DSO has no influence
Ground conditions: underground cabling costs vary significantly between municipalities depending on soil type, topography, and urban density

How to handle these exogenous cost differences in the benchmarking model continues to be investigated during spring 2026.

2. Maximum cap on revenue impact

The maximum amount by which the efficiency incentive can affect a DSO’s revenue frame (either upward or downward) has not yet been determined. This parameter determines the incentive’s overall strength and the financial risk exposure for individual companies.

Stakeholder input

Ei invites affected parties to submit written comments on the described directions and the open questions to forhandsreglering@ei.se.

Relevance to the wiki

Ei: Partially resolves the data gap on “Final TOTEX method choice.” Enstegsmetoden confirmed, Q3 threshold set, no general requirement confirmed, 8-year realiseringstid retained. Two new specific gaps remain (adjustment methodology, maximum cap).
Flexibility › The CAPEX bias problem: The TOTEX reform design is now more concrete — the Q3 threshold, no-general-requirement rationale, and realized-cost basis of enstegsmetoden all enrich understanding of how lösningsneutralitet will work in practice.
Glossary: Grounds the definitions of effektiviseringsincitament, enstegsmetoden, and realiseringstid.