Norway is about to reorganize its electricity production sector from a predominantly administered one to one which is based on market prices and principles of efficiency. The objective of this paper is to model the energy sector and to measure the size of hydro rent before and after the reorganization. We construct a regionally diversified and integrated equilibrium model of production, transmission and distribution of hydroelectricity. Particular attention is paid to the role of precipitation variability for the size and regional variation of hydro rent. We consider alternative routes for assessing the size of hydro rent in a long-run perspective.