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When Does Electricity Price Cap Regulation Become Distortionary?

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  • Paul Simshauser

Abstract

type="main" xml:lang="en"> Australia has a deregulated national wholesale electricity market, a national network regulatory framework, but inconsistent state-based regulated retail price caps in workably competitive markets. This article finds that asymmetric information and the complexity of energy markets means that a regulator, no matter how wise and well resourced, could never be expected to produce reliable estimates of competitive prices. If regulation represents a policy constraint, relying on long-run concepts rather than short-run prices is least damaging to the flow of capital and non-linear pricing.

Suggested Citation

  • Paul Simshauser, 2014. "When Does Electricity Price Cap Regulation Become Distortionary?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 47(3), pages 304-323, September.
    • Handle: RePEc:bla:ausecr:v:47:y:2014:i:3:p:304-323
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    Cited by:

    1. Krishnan C, Muralee & Gupta, Santanu, 2018. "Political pricing of electricity – Can it go with universal service provision?," Energy Policy, Elsevier, vol. 116(C), pages 373-381.
    2. Simshauser, Paul, 2018. "Price discrimination and the modes of failure in deregulated retail electricity markets," Energy Economics, Elsevier, vol. 75(C), pages 54-70.
    3. Simshauser, Paul & Whish-Wilson, Patrick, 2017. "Price discrimination in Australia's retail electricity markets: An analysis of Victoria & Southeast Queensland," Energy Economics, Elsevier, vol. 62(C), pages 92-103.
    4. Simshauser, Paul & Tian, Yuan & Whish-Wilson, Patrick, 2015. "Vertical integration in energy-only electricity markets," Economic Analysis and Policy, Elsevier, vol. 48(C), pages 35-56.
    5. Paul Simshauser and David Downer, 2016. "On the Inequity of Flat-rate Electricity Tariffs," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    6. Danias, Nikolaos & Swales, J. Kim, 2018. "The welfare impacts of discriminatory price tariffs," Energy Economics, Elsevier, vol. 71(C), pages 321-331.

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