APPENDIX G – RWE Energy - Cost Benchmarking Techniques

Each dot represents one company as the intersection of its output (X) and its costs (Y). The solid line (OLS) represents the “Ordinary Least Squares” regression line, which defines the average or expected value of Y (costs) for each value of X (output). It is defined by the intercept, a, and the gradient, b. Without delving into the details of the technique, it amounts to “drawing a line through the middle of the dots”.