Energy regulators typically set the allowed revenues of regulated utilities according to the building-block approach, which promote revenue predictability and improve price-stability. However, building blocks also promote "capex bias" and a number of regulators are considering using TOTEX as a means of addressing it.

Determining efficient allowed revenues requires robust efficiency analysis and regulators typically rely on a number of parametric and non-parametric tools and assign an efficiency score to a given regulated utility based on their performance relative to a comparable sample. Depending on data availability, these measures can be partial (uni-dimensional ratios) or total: most common ones include Data Envelopment Analysis (non-parametric) and stochastic models (such as Ordinary Least Squares, Corrected Ordinary Least Squares and Stochastic Frontier Analysis).

The ERRA course on Efficiency Analysis will review the principles of imputing efficiency incentives in the allowed revenues and the advantages and implementation challenges of TOTEX. Theoretical foundations will be coupled with both national regulatory case studies and excel-based exercises to add to practical learning experience.