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Incentive Regulation In Theory And Practice - Electricity Distribution And Transmission Networks

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Paul L Joskow

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Abstract

Over the last twenty years several network industries that evolved historically as either private or state-owned regulated vertically integrated monopolies have been privatized, restructured, and some vertical segments deregulated. These industries include telecommunications, natural gas, electric power, and railroads. The reform program typically involves the vertical separation (ownership or functional) of potentially competitive segments, which are gradually deregulated, from remaining vertical segments that are assumed to have natural monopoly characteristics and continue to be subject to price, network access, service quality and entry regulations. In several countries, an important part of the reform agenda has included the introduction of “incentive regulation” mechanisms for the remaining regulated segments as an alternative to traditional “cost of service” or “rate of return” regulation. The expectation was that incentive regulation mechanisms would provide more powerful incentives for regulated firms to reduce costs, improve service quality in a cost effective way, stimulate (or at least not impede) the introduction of new products and services, and stimulate efficient investment in and pricing of access to regulated infrastructure services.

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Paper provided by Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research in its series Working Papers with number 0514.

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Date of creation: Sep 2005
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Handle: RePEc:mee:wpaper:0514

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Michele Moretto & Paola Valbonesi, 2007. "Firm Regulation and Profit Sharing: A Real Option Approach," Topics in Economic Analysis & Policy, Berkeley Electronic Press, vol. 7(1), pages 1714-1714. [Downloadable!] (restricted)
    Other versions:
  2. Merz, Carina, 2008. "Monetaere Bewertung der Netzzuverlaessigkeit fuer eine effiziente Qualitaetsanreizregulierung," EWI Working Papers 2008-1, Energiewirtschaftliches Institut an der Universitaet zu Koeln. [Downloadable!]
  3. Pollitt, M., 2007. "Evaluating the evidence on electricity reform: Lessons for the South East Europe (SEE) market," Cambridge Working Papers in Economics 0756, Faculty of Economics, University of Cambridge. [Downloadable!]
    Other versions:
  4. Daron Acemoglu & Amy Finkelstein, 2006. "Input and Technology Choices in Regulated Industries: Evidence From the Health Care Sector," NBER Working Papers 12254, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Vincent Rious & Jean-Michel Glachant & Yannick Perez & Philippe Dessante, 2008. "The Diversity of Design of TSOs," Working Papers 0805, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research. [Downloadable!]
    Other versions:
  6. Vincent Rious & Yannick Perez & Philippe Dessante, 2008. "Is combination of nodal pricing and average participation tariff the best solution to coordinate the location of power plants with lumpy transmission investments?," Post-Print hal-00323878_v1, HAL. [Downloadable!]
    Other versions:
  7. Uwe Leprich & Jochen Diekmann & Hans-Joachim Ziesing, 2007. "Künftige Netzregulierung als Grundpfeiler einer effektiven Liberalisierung des deutschen Stromsektors," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 76(1), pages 87-98. [Downloadable!] (restricted)
  8. Vincent Rious & Yannick Perez & Philippe Dessante, 2008. "The efficiency of short run and long run locational signals to coordinate generation location with lumpy transmission investments," Post-Print hal-00339505_v1, HAL. [Downloadable!]
  9. Adrien De Hauteclocque & Vincent Rious, 2008. "Regulatory Uncertainty and Inefficiency for the Development of Merchant Lines in Europe," Post-Print hal-00338296_v1, HAL. [Downloadable!]
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