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Price Cap Regulation: Problems and Solutions

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  • Robert Loube

Abstract

The problems of price cap regulation include: the transformation from rate-of-return regulation, the adoption of a price cap formula, cross-subsidization, and the relationship between regulation and competition. The experience of price cap regulation reveals that it does not protect monopoly customers, and it allows utilities to engage in cross-subsidization. These results imply that the regulator must periodically review price cap results to realign prices with the cost of service and to ensure that a level playing field that would nurture competition develops in every market.

Suggested Citation

  • Robert Loube, 1995. "Price Cap Regulation: Problems and Solutions," Land Economics, University of Wisconsin Press, vol. 71(3), pages 286-298.
    • Handle: RePEc:uwp:landec:v:71:y:1995:i:3:p:286-298
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    Cited by:

    1. Jorge Andrés Perdomo Calvo & Mariana Rubio, 2012. "Regulación económica para la tarifa de parqueaderos en Bogotá mediante precios máximos," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, December.
    2. Perdomo Calvo, Jorge Andrés, 2014. "An Economics Approach to Fixing the Fare of the Parking Lot Service in Bogotá Using Price Cap Regulation," MPRA Paper 79614, University Library of Munich, Germany.
    3. Seeto, Dewey Q. & Woo, C. K. & Horowitz, Ira, 2001. "Finessing the unintended outcomes of price-cap adjustments: an electric utility multi-product perspective," Energy Policy, Elsevier, vol. 29(13), pages 1111-1118, November.

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