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Let's Get Physical! Or Financial? A Study of Electricity Transmission Rights

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  • Brian T. Kench

Abstract

I test experimentally the predictions of neoclassical theory for a radial electricity market without rights to the transmission line, with rights that give the owner a financial right to a share of the transmission congestion charges collected by a network operator, and with physical rights which give the owner the exclusive right to utilize a portion of the transmission line. I find that physical rights lead to more "right" market signals, diminish some market-power, and remove an uncertainty about electricity transmission congestion better than financial rights or the absence of rights.

Suggested Citation

  • Brian T. Kench, 2004. "Let's Get Physical! Or Financial? A Study of Electricity Transmission Rights," Journal of Regulatory Economics, Springer, vol. 25(2), pages 187-214, March.
    • Handle: RePEc:kap:regeco:v:25:y:2004:i:2:p:187-214
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    Cited by:

    1. Carine Staropoli & Celine Jullien, 2006. "Using Laboratory Experiments to Design Efficient Market Institutions: The case of wholesale electricity markets," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00569121, HAL.
    2. Sun, Junjie, 2005. "U.S. Financial Transmission Rights: Theory and Practice," Staff General Research Papers Archive 12266, Iowa State University, Department of Economics.
    3. Bastian Henze & Charles Noussair & Bert Willems, 2012. "Regulation of network infrastructure investments: an experimental evaluation," Journal of Regulatory Economics, Springer, vol. 42(1), pages 1-38, August.
    4. Carine Staropoli & Celine Jullien, 2006. "Using Laboratory Experiments to Design Efficient Market Institutions: The case of wholesale electricity markets," Post-Print hal-00569121, HAL.
    5. Christoph Engel & Klaus Heine, 2017. "The dark side of price cap regulation: a laboratory experiment," Public Choice, Springer, vol. 173(1), pages 217-240, October.

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