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Toward Improved and Practical Incentive Regulation

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  • Brown, Lorenzo
  • Einhorn, Michael
  • Vogelsang, Ingo

Abstract

The first half of this paper overviews traditional methods of rate-making--embedded and marginal cost pricing--and four recent alternatives--automatic rate adjustments, profit-sharing, tariff menus, and the Vogelsang-Finsinger convergence mechanism--that have come to challenge them. The authors develop a list of nine desirable properties that are suitable to gauge any regulatory mechanism. In the second half of the paper, they explore in greater detail two recent incentive plans--the FCC's price caps approach and a mechanism that the three authors proposed in a FERC document. Based on the nine properties, these two mechanisms are compared. Copyright 1991 by Kluwer Academic Publishers

Suggested Citation

  • Brown, Lorenzo & Einhorn, Michael & Vogelsang, Ingo, 1991. "Toward Improved and Practical Incentive Regulation," Journal of Regulatory Economics, Springer, vol. 3(4), pages 323-338, December.
    • Handle: RePEc:kap:regeco:v:3:y:1991:i:4:p:323-38
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    Citations

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    Cited by:

    1. Juan Rosellón, 2009. "Mechanisms for the Optimal Expansion of Electricity Transmission Networks," Chapters, in: Joanne Evans & Lester C. Hunt (ed.), International Handbook on the Economics of Energy, chapter 24, Edward Elgar Publishing.
    2. Galal, Ahmed & Nauriyal, Bharat, 1995. "Regulating telecommunications in developing countries : outcomes, incentives, and commitment," Policy Research Working Paper Series 1520, The World Bank.
    3. Jayanath Ananda & Nicholas Pawsey & Tahmid Nayeem, 2022. "Customer‐centric regulation: The case of Victorian urban water sector," Regulation & Governance, John Wiley & Sons, vol. 16(2), pages 536-556, April.
    4. Ingo Vogelsang, 1999. "Optimal Price Regulation for Natural and Legal Monopolies," Economía Mexicana NUEVA ÉPOCA, CIDE, División de Economía, vol. 0(1), pages 5-43, January-J.
    5. Ingo Vogelsang, 2006. "Electricity Transmission Pricing and Performance-based Regulation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 97-126.
    6. Stephen G. Donald & David E. M. Sappington, 1995. "Explaining the Choice Among Regulatory Plans in the U.S. Telecommunications Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 237-265, June.
    7. Costello, Kenneth W., 2019. "Design considerations for multiyear Public Utility rate plans," Utilities Policy, Elsevier, vol. 59(C), pages 1-1.
    8. Pfeifenberger, Johannes P & Tye, William B, 1995. "Handle with care : A primer on incentive regulation," Energy Policy, Elsevier, vol. 23(9), pages 769-779, September.

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