IDEAS home Printed from https://ideas.repec.org/a/taf/conmgt/v21y2003i4p409-419.html
   My bibliography  Save this article

Tariff adjustment frameworks for privately financed infrastructure projects

Author

Listed:
  • Sudong Ye
  • Robert Tiong

Abstract

Since privately financed infrastructure (PFI) projects are usually natural monopolies, their tariffs should be regulated to ensure socially desirable outcomes. In reality, the regulation is usually realized through tariff adjustment mechanisms. There are four basic tariff adjustment frameworks for PFI projects - adjustment based on sale price, revenue, operating income and profit after tax. They have different risk exposures and incentives. The adjustment based on the sale price provides the project company with the highest potential to increase profit but exposes it to the highest risk, while the adjustment based on the guaranteed ROR exposes the project company to the lowest risk but provides the least potential for increasing profit. Adjustments based on the revenue or the operating income are somewhere in between. In practice, a hybrid of two or more adjustment frameworks may be adopted to adapt to specific project environments. A well-designed tariff adjustment framework can create a 'win-win' solution for both the public and private sectors.

Suggested Citation

  • Sudong Ye & Robert Tiong, 2003. "Tariff adjustment frameworks for privately financed infrastructure projects," Construction Management and Economics, Taylor & Francis Journals, vol. 21(4), pages 409-419.
    • Handle: RePEc:taf:conmgt:v:21:y:2003:i:4:p:409-419
    DOI: 10.1080/0144619032000073550
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/0144619032000073550
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/0144619032000073550?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Crampes, Claude & Estache, Antonio, 1998. "Regulatory trade-offs in the design of concession contracts," Utilities Policy, Elsevier, vol. 7(1), pages 1-13, March.
    2. M.E. Beesley & S.C. Littlechild, 1989. "The Regulation of Privatized Monopolies in the United Kingdom," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 454-472, Autumn.
    3. Brennan, Timothy J, 1989. "Regulating by Capping Prices," Journal of Regulatory Economics, Springer, vol. 1(2), pages 133-147, June.
    4. Kenneth E. Train, 1991. "Optimal Regulation: The Economic Theory of Natural Monopoly," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200848, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Abraham Park & Chen Yu Chang, 2013. "Impacts of Construction Events on the Project Equity Value of the Channel Tunnel Project," ERES eres2013_97, European Real Estate Society (ERES).
    2. Maziotis, Alexandros & Saal, David S. & Thanassoulis, Emmanuel & Molinos-Senante, María, 2016. "Price-cap regulation in the English and Welsh water industry: A proposal for measuring productivity performance," Utilities Policy, Elsevier, vol. 41(C), pages 22-30.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mehdi Farsi & Aurelio Fetz & Massimo Filippini, 2007. "Benchmarking and Regulation in the Electricity Distribution Sector," CEPE Working paper series 07-54, CEPE Center for Energy Policy and Economics, ETH Zurich.
    2. Noel Uri & Florence Setzer, 2003. "Assessing the Performance of the Price Cap Plan for Local Exchange Carriers in the United States," European Journal of Law and Economics, Springer, vol. 15(3), pages 263-276, May.
    3. Mostafa Pazoki & Hamed Samarghandi & Mehdi Behroozi, 2023. "Increasing Supply Chain Resiliency Through Equilibrium Pricing and Stipulating Transportation Quota Regulation," Papers 2308.00681, arXiv.org, revised Oct 2023.
    4. Bernstein, Jeffrey I & Sappington, David E M, 1999. "Setting the X Factor in Price-Cap Regulation Plans," Journal of Regulatory Economics, Springer, vol. 16(1), pages 5-25, July.
    5. Gianni De Fraja & Alberto Iozzi, "undated". "Short Term and Long Term Effects of Price Cap Regulation," Discussion Papers 00/61, Department of Economics, University of York.
    6. Breton, Michèle & Kharbach, Mohammed, 2012. "Transportation and storage under a dynamic price cap regulation process," Energy Economics, Elsevier, vol. 34(4), pages 918-929.
    7. Paul L. Joskow, 2014. "Incentive Regulation in Theory and Practice: Electricity Distribution and Transmission Networks," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 291-344, National Bureau of Economic Research, Inc.
    8. Defilippi, Enzo, 2015. "X-factor regulation in a developing country: The case of Lima's airport," Transport Policy, Elsevier, vol. 41(C), pages 16-22.
    9. Paul L. Joskow, 2006. "Incentive Regulation for Electricity Networks," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 4(2), pages 3-9, 07.
    10. Pazoki, Mostafa & Samarghandi, Hamed & Behroozi, Mehdi, 2024. "Increasing supply chain resiliency through equilibrium pricing and stipulating transportation quota regulation," Omega, Elsevier, vol. 127(C).
    11. Foreman, R. Dean, 1995. "Pricing incentives under price-cap regulation," Information Economics and Policy, Elsevier, vol. 7(4), pages 331-351, December.
    12. Haucap, Justus & Lange, Mirjam R. J. & Wey, Christian, 2012. "Nemo Omnibus Placet: Exzessive Regulierung und staatliche Willkür," DICE Ordnungspolitische Perspektiven 27, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    13. Klein, Michael, 1996. "Competition in network industries," Policy Research Working Paper Series 1591, The World Bank.
    14. Noel Uri, 2001. "Telecommunications in the United States and Changing Productive Efficiency," Journal of Industry, Competition and Trade, Springer, vol. 1(3), pages 321-335, September.
    15. Richard Tol, 2011. "Regulating knowledge monopolies: the case of the IPCC," Climatic Change, Springer, vol. 108(4), pages 827-839, October.
    16. Noel Uri, 2003. "The Effect of Incentive Regulation in Telecommunications in the United States," Quality & Quantity: International Journal of Methodology, Springer, vol. 37(2), pages 169-191, May.
    17. repec:kap:iaecre:v:17:y:2011:i:4:p:465-475 is not listed on IDEAS
    18. Eto, J. & Stoft, S. & Kito, S., 1998. "DSM shareholder incentives: recent designs and economic theory," Utilities Policy, Elsevier, vol. 7(1), pages 47-62, March.
    19. Johnstone, David & Havyatt, David, 2022. "Sophistry and high electricity prices in Australia," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 88(C).
    20. Bauer, Johannes M., 2014. "Platforms, systems competition, and innovation: Reassessing the foundations of communications policy," Telecommunications Policy, Elsevier, vol. 38(8), pages 662-673.
    21. Adler, Nicole & Forsyth, Peter & Mueller, Juergen & Niemeier, Hans-Martin, 2015. "An economic assessment of airport incentive regulation," Transport Policy, Elsevier, vol. 41(C), pages 5-15.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:conmgt:v:21:y:2003:i:4:p:409-419. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RCME20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.