Transforming complexity to clarity

Insightful analysis & expert advice on difficult economic & regulatory questions

Using data & economic theory to provide advice to essential service industries

At Econalytics we use economic theory and empirical data to help our clients navigate the complex world of consumer behaviour and regulation. Our focus and expertise centres on essential service industries including electricity, natural gas and transportation.

Econalytics’ mission is to help our clients put the right rules, policies and programmes in place to ensure that end-use consumers of essential services are able to meet their needs at the lowest possible sustainable cost. To accomplish this we provide our clients with insightful analysis and expert advice giving them the tools they need to make informed and effective policy and program choices.

Econalytics thrives on making sense of complex problems and providing clear and jargon free explanations. We pride ourselves on our ability to dig deeper and come up with creative solutions to seemingly intractable problems. At the core of the Econalytics approach is the idea that people follow incentives.

Understanding these incentives allows us to make better sense of observed behaviour and proactively design policies that anticipate real human reactions. Econalytics has proven expertise in designing and evaluating regulatory policy; creating and analysing large datasets; model building; tariff design; experimental design and statistical impact evaluation.

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IMPACT EVALUATION
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BENEFIT COST ANALYSIS
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REGULATORY POLICY
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Experimental design

Experimental design is a crucial first step in obtaining accurate and credible measurements of program impacts in both pilot studies and system-wide program rollouts.

Evaluating a program after implementation, without considering experimental design is complex and costly, and poses a major risk that the data is too noisy to detect program impacts. A well conceived experimental design strategy will ensure that program impacts are statistically detectable, while minimizing the impact evaluation cost by simplifying the evaluation strategy.

The key element in designing a valid experiment is creating a control group that is identical to the program recipients in all ways, apart from being “treated” with the program. Econalytics can assist with all elements in program design including:  selecting and enrolling participants, program rollout, designing alternative treatments, advising on data needs, impact simulation and sample size calculations.

Econalytics understands the real world constraints faced by utilities and can help you to design a program that balances out conflicting budgetary, regulatory and customer management objectives, while still producing measurable and credible results.  

Experience

  • Pricing pilot design manual

    Ontario Energy Board (OEB)
    Created an experimental design manual and ran a series of pricing pilot design workshops for Ontario’s electricity distribution utilities

  • Behavioural conservation program designs

    Simple Energy (now Uplight)
    Worked with Simple Energy and their utility clients to create statistically valid program designs suited to their budget, metering and communication technologies

  • Piloting innovate tariff designs

    China Light and Power (CLP)
    Helped CLP develop pilot studies to test a variety of time varying rates

  • Demonstrating benefits from new technologies

    Energy sector technology startups
    Advised a number of technology startups on how to structure program design to credibly demonstrate impacts from their technologies, while keeping costs as low as possible.

TARIFF DESIGN & COST OF SERVICE

A cost of service study apportions utility costs to different customer groups based on how they use the system. This is a vital input to tariff design, indicating how much revenue needs to be recovered from each customer group and what factors are driving future costs.

Allocating costs to the customer-groups that incur them involves a deep understanding of how the costs are generated and recorded. Econalytics can assist you in building tractable and data driven cost of service models that integrate all available data sources, and account for new technologies and customer services. 

Well designed tariffs act as a guide to consumers, showing them which behaviours help create lower and sustainable costs for all consumers.

Econalytics can help you to design, trial and implement tariffs that provide customers with cost saving consumption and investment signals, while also ensuring that other objectives, such as protecting vulnerable consumers, are met. Econalytics also has experience in designing and evaluating combined tariff and technology trials. 

Experience

  • Developed an integrated tariff design and cost of service model suite

    Tenaga Nasional Berhad (TNB)
    Developed data driven cost of service and tariff design models. Created a new integrated load dataset to create the customer load shape data underlying both models. Insights from the models are driving system wide tariff reform.

  • Flexible big-data cost of service models

    Pacific Gas & Electric (PG&E)
    Updated cost of service models to use new digital datasets (“big data”) and take into account new customer services. Standardised and automated model design to reduce risk of user error. Developed new marginal cost models to calculate integration costs of distributed energy resources.

  • Innovative distribution network tariff design

    Victorian Electricity Distribution Networks
    Developed an innovative tariff framework for the Victorian Electricity Distribution Networks that would promote retail competition and lower customer bills by focusing on retailers rather than end-use customers.

  • Stakeholder led tariff design

    Ameren Missouri
    Assisted a utility and external stakeholders to reach consensus on future tariff objectives through educational workshops and transparent online tools that helped them rank priorities and link these to tariff reform objectives.

Impact evaluation

Accurate statistical measurement of program impacts is essential to assessing the viability of new ideas and maintaining and improving on older ones.

There are two key components to conducting a valid and credible statistical impact evaluation: creating a suitable control group and having a comprehensive understanding of the underlying data.

At Econalytics we have worked with hundreds of complex data sets and are experts in analysing, investigating and remedying data errors and anomalies.

We understand that data is not a fact, but a series of subjective decisions, each of which can lead to misleading conclusions.

Econalytics has a tremendous amount of experience conducting real-world program evaluations under difficult circumstances and pride ourselves on our ability to dig deeper into the data and design creative solutions that allow for valid and accurate statistical measurement of program impacts.

Experience

  • Load shifting impacts of system-wide Time of Use tariff deployment

    Ontario Power Authority (OPA, now the IESO)
    Measured the impacts of a system-wide Time of Use (TOU) deployment in the province of Ontario, Canada. To account for the lack of a designated control group, we created a quasi-experimental design that took advantage of differences in the timing of the TOU rollout. This multi-year evaluation involved working with large smart meter datasets from millions of customers.

  • Behavioral efficiency impacts

    Behavioral conservation service provider
    Evaluated the impacts of a large behavioral conservation experiment in California, where the control group was inadvertently treated. Impacts were estimated using randomness in eligibility criteria to create a quasi-experimental control group that was statistically indistinguishable from the treatment group.

  • Impacts of information and technologies on conservation

    Energy Market Authority (EMA)
    Measured the independent and combined impacts of various information feedback strategies and technologies in Singapore on behalf of the EMA.

  • Evaluation strategy to measure benefits from a mass rollout of smart-meters

    Pepco Holdings Inc. (PHI)
    Designed strategy for measuring conservation benefits of smart-meter enabled technologies for Pepco Holdings Inc., after the system-wide rollout of such technologies. Used data from neighboring utilities and exploited differences in their smart-meter rollout strategies to create control groups.

Benefit-cost analysis & technology potential studies

Not all program benefits are easy to quantify for program assessment tools such as benefit-cost analysis. However, if these real benefits are excluded from the benefit-cost analysis, then programs that can potentially provide a tremendous benefit to society may not be approved.

At Econalytics we recognise that societal welfare depends on far more than easy to calculate financial benefits. Instead of shying away from difficult problems, we embrace them, bringing a fuller range of criteria to decision making.

By identifying and analysing data on real-human decisions, rigorously analysing the existing scientific research and designing pilot programs and experiments, we are able to credibly quantify alternative program benefits and help our clients to obtain approval for those programs that best fulfill the needs of their customers.

Experience

  • Conservation and load-shifting benefits of smart-meters

    Mid-Western Utility
    Developed benefit-cost model of smart-meter enabled conservation and load shifting for a smart-meter business case. Created a unique model that forecast electric vehicle adoption as a function of time-varying electricity rates.

  • Public benefits of leasing energy efficient equipment

    Puget Sound Electric (PSE)
    Evaluated the barriers to customer adoption of energy efficient equipment under traditional utility efficiency programs. Estimated incremental adoption and associated benefits and costs from a utility leasing program.

  • Economic potential for electricity cogeneration

    Middle-Eastern Energy Regulator
    Worked with local engineers to build a bottom up model estimating the national technical potential for cogeneration facilities. Created an economic potential model to evaluate how much of this could be realised under the status quo and alternative regulatory policies.

Regulatory policy

Regulatory policy is continuously advancing to integrate new technologies, meet changing consumer needs and incorporate advances in regulatory theory and our understanding of consumer behaviour. A constant cycle of program design, evaluation, and redesign is needed to ensure that firm and customer incentives are aligned as closely as possible.

The changing nature of the energy and transport sectors make this extremely pertinent, as new technologies and new entrants change the nature of the services provided and challenge previous notions about the extent and range of services that can be provided in competitive markets.

Econalytics brings a nuanced and thoughtful approach to examining these issues, breaking down complex ideas and theories into clear and intuitive components. Our experience of regulatory policies across multiple jurisdictions gives us a broader sense of the possible, and allows for a wider range of potential solutions (and caveats) for achieving our client’s objectives.

Experience

  • Appropriate weighting for uncertainty under alternative theories of consumer attitudes to risk

    Australian Energy Market Commission (AEMC)
    Assessed whether new theories of consumer attitudes towards risk should alter the weighting that planners give to uncertain future events, in particular high impact, low probability outcomes.

  • Innovations in incentive regulation of evolving electricity distribution networks

    Electricity Networks Association (ENA) New Zealand
    Analysed new mechanisms that have been created across a number of international jurisdictions to fix gaps that have arisen in a rapidly changing electricity distribution network landscape.

  • International Experiences in Retail Electricity Markets - Consumer Issues

    Australian Consumer and Competition Commission (ACCC)
    Conducted a detailed inter-jurisdictional review assessing the mechanisms that regulators use to increase competition in retail electricity markets, while still protecting vulnerable consumers. This report informed the ACCC’s review into retail competition in the National Electricity Market.

  • Behavioural biases and retail market competition

    New Zealand Distribution Utility
    Examined whether behavioural biases common amongst consumers could be used by firms to lessen competition in retail electricity markets. This informed our client’s regulatory and tariff strategy.

About Neil Lessem

Econalytics founder, Dr. Neil Lessem, is a highly experienced economic consultant, with extensive knowledge of the energy sector in particular. Specialising in environmental, behavioural and regulatory economics, he has assisted utilities, policymakers and technology firms around the world, on rate design, energy policy, innovative pricing, experimental design, technology adoption and policy impact measurement.

Dr Lessem’s past regulatory clients include the Saudi Arabian Electricity & Cogeneration Regulatory Authority (ECRA), the Malaysian Energy Commission (Suruhanjaya Tenaga), the Ontario Energy Board (OEB), the Australian Competition and Consumer Commission (ACCC), the Australian Energy Markets Commission (AEMC), Australian Energy Market Operator (AEMO), The Australian Energy Regulator (AER), the Australian Energy Networks Australia (ENA), Energy Consumers Australia (ECA), and the New Zealand Electricity Networks Association (ENA).

Major utility clients include some of the largest utilities in the United States (Pacific Gas & Electric), Malaysia (Tenaga Nasional Berhad) and Australia (the Victorian Distribution Networks).      

Prior to consulting, Dr Lessem obtained his Ph.D. from the University of California in Los Angeles (UCLA), where he used experimental and real-world data to examine consumer motivation for purchasing environmentally friendly products and services. Dr Lessem’s undergraduate studies were at the University of Cape Town (UCT), where he obtained an Honours Degree in Economics, Business and History.

Dr Lessem has lectured on various topics in economics at UCLA, UCT and the University of Sydney, including behavioural, environmental and regulatory economics. He has spoken at numerous conferences around the world, including the United States, Canada, Brazil, the Netherlands, Australia, New Zealand and Thailand.

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