Performance benchmarking models for electricity transmission regulation: Caveats concerning the Brazilian case

Abstract Regulation plays an important role under natural monopoly markets, such as energy electricity distribution and transmission. In recent years, abrupt changes in the regulation of the Brazilian Transmission System Operators (TSOs) has increased the risk perceived by investors, harming the economic stability of the sector. In this paper, we present a review of the benchmarking model used to regulate Brazilian TSOs' operational costs. The objective of the paper is to suggest improvements in the Data Envelopment Analysis (DEA) model proposed by the regulator in 2018. The suggested changes would help to ensure a robust and reliable regulatory process.